What to Expect from Union Budget 2026: An India Market Entry Perspective

As India prepares for the Union Budget 2026, scheduled for 1 February 2026, global businesses and investors are watching closely, not just for headline numbers, but for signals of policy continuity, regulatory clarity and long-term intent. For companies evaluating India as their next growth market, this Budget is expected to reinforce India’s positioning as a stable, reform-driven and investment-ready economy.

A macro environment that supports entry

India enters the Budget cycle with strong economic momentum. GDP growth touched 7.8% in Q1 FY2025-26, compelling the RBI (Reserve Bank of India) to revise its full-year growth outlook between to 6.8% to 7.2%. This growth is underpinned by resilient domestic consumption, robust services exports and sustained public capital expenditure.

For foreign firms, this stability matters. Predictable inflation, improving purchasing power, and continued government spending on infrastructure reduce market-entry risk and improve demand visibility.

Tax reform: clarity over complexity

One of the most consequential developments for incoming businesses is the new Income-tax Act, 2025, which comes into effect from 1 April 2026. The revised law is designed to simplify terminology, consolidate provisions and enable a digital-first tax administration.

Pre-Budget discussions suggest that the Union Budget 2026 is likely to fine-tune rather than overhaul the new tax framework. A few of the strong expectations of incremental relief measures may include:

1. a potential increase in the standard deduction under the new tax regime,

2. selective rationalisation of thresholds rather than changes to core slabs, and

3. continued emphasis on reducing litigation and improving refund timelines.

From an India entry lens, key expectations continue to include:

1. Simplification of withholding tax provisions to reduce cash-flow blockages

2. Faster refunds and lower litigation exposure

3. Greater certainty in international tax concepts such as Significant Economic Presence (SEP)

These measures aim to make India’s tax environment more predictable—an essential requirement for foreign capital planning.

GST 2.0 and indirect tax efficiency

The Union Budget 2026 is also expected to deepen the rollout of GST 2.0, following the rate rationalisation announced in late 2025. The shift towards fewer rate slabs and technology-enabled compliance is intended to ease working capital pressures, especially for exporters and new entrants.

Various pre-budget commentary points to a continued focus on refund automation, audit simplification, and ITC flow improvements, rather than on structural changes to GST rates.

Expectations from the bBudget 2026 therefore remain aligned with include:

1. Faster and automated GST refunds
2. Improved Input Tax Credit (ITC) utilisation
3. Simplified registration and audit processes for multi-state businesses

For foreign firms setting up operations, these changes reduce friction in supply chains and pricing.

Trade, FTAs and customs reforms

India’s expanding network of Free Trade Agreements with the UK and EFTA, and ongoing negotiations with the EU and US, signals a stronger outward orientation. The Budget is expected to complement this with further customs digitisation, streamlined duty structures and enhanced trade facilitation.

Furthermore, trade facilitation and export competitiveness remain high on the government’s priority list ahead of Budget 2026, particularly in the context of global supply-chain realignment.

This is particularly relevant for companies entering India as export hubs or global capability centres.

What does this mean for India entry?

Taken together, the Union Budget 2026 is expected to focus on:

1. Policy stability over short-term incentives
2. Compliance simplification rather than regulatory dilution
3. Infrastructure and digital public goods that support scale

For foreign businesses, the message is clear: India is optimising its systems to attract long-term, quality investment, not opportunistic capital.

The Union Budget 2026 is likely to strengthen the fundamentals that matter most for India entry, clarity, predictability, and ease of doing business. Companies that align early with the evolving tax, trade and compliance framework will be better positioned to enter and scale in one of the world’s fastest-growing major economies.

Planning your India entry around Budget 2026? For a free assessment of how upcoming policy changes may impact your structure, timelines, and compliance strategy, fill out this form, and our team will connect with you.