Union Budget 2026 positions AI, cloud and tax certainty as pillars of long-term growth

The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, makes one thing clear: India’s next phase of growth will be driven less by incentives and more by infrastructure, certainty, and technology depth.

Alongside headline announcements such as a tax holiday until 2047 for foreign cloud service providers operating from Indian datacentres and a Rs 40,000 crore outlay for Semiconductor Mission 2.0, the Budget signals a broader shift. Technology, particularly artificial intelligence, cloud infrastructure, and digital governance, is now being treated as core economic infrastructure.

This direction is reinforced by parallel reforms in tax administration, customs automation, and trust-based compliance, creating a framework where innovation can scale without friction.

Union Budget: AI and emerging technologies move to the centre

Industry leaders see the Budget as a strong signal that artificial intelligence is no longer a niche policy interest.

Deepank Bhandari, Co-founder, S45, said the Budget underscores that India’s growth will be technology-driven, with a clear focus on AI, emerging technologies, and R&D. He pointed to workforce upskilling and the government’s attention to AI’s impact on jobs as indicators of a future-ready approach, adding that technology-led companies now have greater scope to modernise processes and unlock new growth avenues.

Anand Sahay, Global CEO, Xebia, echoed this view, noting that continued support for initiatives such as the AI Mission and National Quantum Mission strengthens India’s innovation ecosystem. He highlighted AI-led capacity building at scale as a step towards democratising access to future-ready skills.

Prashant Iyer, CEO, M37Labs, described the emphasis on AI and cutting-edge technologies as a pivotal shift in economic strategy, calling an “AI-first” national approach critical for driving productivity and long-term growth.

Cloud, data and digital infrastructure get long-term policy backing

One of the most consequential announcements in the Budget is the proposed tax holiday until 2047 for foreign companies providing global cloud services from Indian datacentres, subject to services being routed to Indian customers through domestic resellers.

This move positions India as a long-term hub for cloud and compute infrastructure, while also signalling policy stability for capital-intensive investments.

Manasa Rajan, Co-Founder & CEO, Jupiter Meta Labs, said the Budget aims to create a stronger digital ecosystem, with increased funding for R&D and indigenous cybersecurity to protect India’s Digital Public Infrastructure. She highlighted the emphasis on Tier-2 and Tier-3 cities, noting that these regions are now driving a significant share of new digital consumers and will shape the next phase of consumption-led growth.

The focus on data governance, supported by the Data Protection Act, further underlines the government’s intent to balance scale with trust.

Startups, MSMEs, and deep-tech capability

The Budget’s technology push also has implications for startups and MSMEs, particularly those operating in deep tech and regulated sectors.

Dr. Rashida Vapiwala, Founder and CEO, LabelBlind, said the Finance Minister’s focus on AI as a growth driver sends a timely message to startups supporting MSMEs. She pointed to initiatives like the National Quantum Mission as evidence of a long-term approach to building future-ready infrastructure, adding that AI-led compliance will become critical as Indian companies access global markets through FTAs.

Amit Kumar Tyagi, CEO, TrueReach AI, described the Budget as a shift towards an “Intelligence-First” era. He said the combination of cloud incentives and national AI initiatives positions India to move beyond outsourcing and build production-grade, globally competitive AI solutions.

Tax certainty and trust-based systems underpin the tech push

Supporting this technology-led vision is a quieter but significant reset in tax and compliance architecture.

Advance rulings under customs will now remain valid for five years. Voluntary tax payments are reclassified as non-punitive charges. The Minimum Alternate Tax framework is rationalised, and share buyback taxation is aligned with capital gains rules. For IT and ITES firms, expanded safe harbour thresholds and faster advance pricing agreements aim to reduce long-standing transfer pricing disputes.

Customs automation, deferred duty payments for trusted entities, and fully digital export clearances further reduce operational friction, freeing up working capital and improving cross-border efficiency.

The broader message is consistent. Reduce ambiguity first. Let the investment follow.

The larger takeaway

Union Budget 2026 does not chase short-term applause. Instead, it lays the groundwork for a technology-driven, rules-based growth model built on AI, cloud infrastructure, and tax certainty.

For businesses and technology leaders, the signal is clear. India is not just scaling digital adoption. It is building the systems needed to sustain it.

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