Union Budget 2026 has reinforced the government’s intent to position artificial intelligence (AI), deep technology and advanced digital services as long-term economic capabilities, with industry executives pointing to clearer regulation, funding support and incentives for scale.
The Budget builds on earlier policy moves around the IndiaAI Mission and the National Quantum Mission, while also addressing long-standing operational concerns for technology firms, particularly those operating across AI, digital services and talent platforms.
Madhu Rajputra Peravalli, co-founder of workforce platform Troogue, said the Budget 2026 offered greater clarity for companies navigating regulatory grey areas. He pointed to the explicit classification of manpower services under contractor tax deduction rules as an example of how policy refinements can reduce uncertainty.
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“Budget 2026 introduces important clarifications for companies operating at the intersection of AI, digital services and workforce platforms,” Peravalli said. “The treatment of manpower services under contractor TDS removes ambiguity that enterprises and talent platforms have navigated for years.”
Tech executives said such measures matter because AI-led business models increasingly combine technology, data and human expertise, often across distributed and digital-first platforms. Clearer taxation and compliance frameworks, they argue, are essential as AI adoption moves from pilots to production.
Beyond taxation, the Budget reiterated the government’s view of artificial intelligence as core digital infrastructure, rather than an experimental technology. References to ethical AI, skills mapping and responsible adoption featured alongside funding commitments for research and innovation.
Sachin Panicker, chief AI officer, Fulcrum Digital, said the Budget 2026 reflects a broader recognition that AI is now a strategic lever for governance, productivity and economic growth.
“The Budget recognises that artificial intelligence is no longer experimental,” Panicker said. He pointed to funding through the Anusandhan National Research Foundation, the Research and Development and Innovation Fund, and continued backing for national AI and quantum missions as signals of longer-term intent.
Budget 2026 raises safe harbour threshold for IT services
The Budget also raised the safe harbour threshold for IT services from ₹300 crore to ₹2,000 crore, a move executives said could significantly reduce compliance friction for mid-sized and fast-growing technology firms.
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Panicker said the change improves operating certainty for a wider segment of the technology ecosystem, particularly firms investing in applied research, data platforms and AI-driven services across sectors such as healthcare, education, agriculture and public administration.
India’s technology sector has long argued that while policy ambition around AI is strong, execution will depend on coordination between government, industry and academia, as well as access to data, compute infrastructure and specialised talent.
Amit Kumar Tyagi, CEO, TrueReach AI, said the Budget lowers barriers for advanced AI development by addressing costs associated with cloud computing and large-scale model training.
He pointed to proposals for tax incentives for cloud services using Indian data centres and subsidised compute access under the IndiaAI Mission as steps that could support domestic innovation.
“By addressing compute costs, the Budget removes a key constraint for high-end innovation,” Tyagi said. He also noted the Economic Survey’s emphasis on sector-specific AI adoption, which aligns with a shift away from one-size-fits-all approaches to artificial intelligence.
Government estimates suggest India aims to increase its share of global services exports over the next two decades, with technology, data and AI playing a central role.
Policymakers have increasingly framed AI not just as a productivity tool but as a capability that underpins competitiveness across manufacturing, services and governance.
IT leaders, however, cautioned that funding announcements alone will not be sufficient. Several pointed to the need for faster rollout of compute infrastructure, clearer data governance norms and skilling pathways aligned with enterprise demand.
Industry leaders said coordination between policy objectives and on-the-ground implementation will determine whether India can translate AI investments into sustained economic value.
Executives said Budget 2026 signals a shift towards treating artificial intelligence, deep tech and emerging technologies as long-term national capabilities, with regulatory clarity and public investment seen as critical to India’s global digital ambitions.
