Union Budget 2026-27 Aims to Rekindle Foreign Investment with Strategic Tax Incentives
In a significant move to counter cooling foreign investor interest, the Union Budget 2026-27 has unveiled a comprehensive package of measures specifically designed to court global and diaspora capital. The Finance Minister's proposals include generous tax holidays, enhanced investment limits, and regulatory relaxations aimed at making India a more attractive destination for international businesses and non-resident Indians (NRIs).
Tax Holidays to Boost Manufacturing and Digital Infrastructure
The Budget offers a 5-year tax holiday for foreign companies supplying capital goods and equipment, creating a clear incentive for manufacturing supply chains considering relocation to India. This initiative is part of a broader strategy to strengthen the country's industrial base and integrate into global value chains.
Additionally, a generous tax holiday for data centers has been extended right up to 2047, aligning with the nation's vision for Viksit Bharat (Developed India). This long-term policy certainty is expected to accelerate investments in digital infrastructure, which is crucial for India's technological advancement and economic growth.
Enhanced Investment Opportunities for NRIs and Foreign Investors
Recognizing the potential of the Indian diaspora, the Finance Minister has raised the individual investment limit for persons resident outside India, including NRIs, allowing them to invest more in Indian equities. Furthermore, the ceiling on how much equity foreigners can hold in an Indian firm has been increased, providing greater flexibility and ownership opportunities.
NRIs are also set to benefit from an asset disclosure scheme that offers immunity from prosecution. For undeclared 'small' assets and incomes, a one-time admission will suffice. The government anticipates that this measure will encourage more NRIs, particularly overseas professionals, to return to India and reengage with the economy financially.
Tax Exemptions to Attract Global Talent and Businesses
To remove barriers for senior global talent considering a move to India, the Budget introduces a tax exemption on global income for foreign experts working in the country. This is expected to address a major irritant and make India more competitive in attracting top-tier professionals.
In another welcome move, Minimum Alternate Tax exemption has been extended to all non-residents, which is particularly good news for foreign businesses, including contractors and service providers. Additionally, making expenditure on critical minerals exploration tax deductible serves as a carrot for global mining firms looking to invest in India's resource sector.
Other Key Initiatives to Foster Financial Hub Status
The Budget also includes other reach-outs such as lower tax incidence for fund management and treasury operations shifting to GIFT City. These measures are designed to enhance the appeal of India's International Financial Services Centre (IFSC) and position GIFT City as a global hub for financial services.
Overall, the Union Budget 2026-27 represents a strategic effort to reinvigorate foreign investment flows, leverage diaspora capital, and create a more conducive environment for global businesses and talent. By addressing key pain points through targeted tax incentives and regulatory reforms, the government aims to bolster India's economic growth trajectory and accelerate progress towards the Viksit Bharat vision.
