/ Pre-Budget Memo · Updated 2026-10-22

Union Budget 2026, what startups + NRIs + foreign companies should watch.

Finance Minister typically presents Union Budget on 1 February — so Budget 2026-27 (covering FY 2027-28) will be presented early February 2027. Based on current policy direction, pre-Budget consultation outputs, and expert interactions through October 2026, here's what founders, NRIs, and foreign company CFOs should anticipate and plan for. This is a planning memo, not a forecast.

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Written by CA Durgesh Chavda

Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · US incorporation, India-US DTAA, FEMA ODI, NRI taxation, cross-border structuring · LinkedIn

/ For Indian startups + founders

Likely themes.

Section 115BAA / 115BAB fine-tuning: possible extension of 115BAB sunset / production-commencement deadline for new manufacturing. Expansion of 115BAB to adjacent sectors (hydrogen, battery, semiconductor adjacency).
Direct Tax Code 2026: long-promised DTC consolidation may see concrete legislative action. Would replace Income Tax Act 1961. Expected direction: simplified structure, retained concessional corporate rates, re-worked capital gains schedule.
Startup India benefits: Section 80-IAC 3-year tax holiday + Section 54GB long-term capital gain re-investment exemption review (current eligibility criteria likely to be relaxed).
Section 56(2)(viib) angel tax: fully abolished in Finance Act 2024; no reversal expected. Historical pre-abolition cases will continue to be litigated.
LTCG 12.5% framework (post-Finance Act 2024): possible fine-tuning on indexation choice for immovable property, consolidation of holding-period thresholds across asset classes.
Section 194R / 194T: possible rate rationalisation after 3 years of implementation experience.
GIFT City IFSC: likely further concessions — expanded Section 10(4D) scope, new fund-management categories, specific sector incentives (space, semiconductor fund).

/ For NRIs

What to anticipate.

Section 6(1A) deemed resident: possible threshold revision (currently 120 days + INR 15 lakh India income). May be relaxed or made more aggressive depending on political direction.
NRI property sale TDS: Section 195 default 20% may continue; Section 197 LDC framework likely unchanged. See our LDC guide.
DTAA renegotiations: multiple treaty renegotiations in progress (US-India being updated, India-UK CETA integration). Likely tightening of beneficial ownership + GAAR / PPT provisions.
Form 10F electronic filing: likely further clarifications on PAN-less NRI route + validity period.
NRE / NRO / FCNR: FEMA framework stable; no major changes anticipated.
Section 54 reinvestment: possible threshold revisions for residential property reinvestment amounts.

/ For foreign companies

What's on the horizon.

DPDP Act operational Rules: January 2025 draft Rules may be finalised during 2026; expect final notification by Budget 2026. Significant Data Fiduciary notifications pending.
FDI reform expansion: following 2024 space + telecom reforms, further sectors may see liberalisation (insurance beyond 74%, defence specific sub-sectors, media deeper openings).
PLI scheme additions: shipbuilding, chemicals, leather, toys mentioned in pre-Budget consultation. Expansion likely.
BEPS Pillar 2 (Global Minimum Tax): operational for in-scope groups from FY 2025-26. Compliance infrastructure refined via Budget 2026.
Equalisation Levy phase-out: under BEPS Pillar 1, India's Equalisation Levy framework being phased out. Budget 2026 may clarify complete sunset.
India-UK CETA: operational benefits ramping up; preferential tariffs on 95%+ of trade lines. See our India-UK CETA guide.
Semiconductor + chip ecosystem: ISM 2.0 potentially announced with expanded capex subsidy pool.
Account Aggregator framework: likely expanded sector coverage (property records, utility bills).

/ Pre-Budget planning actions

What to do now.

Q3 FY 2026-27 advance tax: due 15 December 2026. Pay 75% of estimated full-year tax by then. See our Q3 advance tax guide.
FY 2026-27 planning: finalise capital gain reinvestment (Section 54 / 54F / 54EC) decisions before 31 March 2027.
Section 115BAB opt-in: new manufacturing company must opt in via Form 10-ID at first ITR filing. Verify eligibility.
GSTR-9 FY 2024-25: due 31 December 2026. Reconcile GSTR-1 vs 3B, 3B vs 2B, books vs GST turnover.
DPDP compliance readiness: audit personal data flows, prepare consent architecture, Data Protection Officer (where applicable).
Transfer pricing documentation: Form 3CEB benchmarking study for FY 2025-26 Indian subsidiary of foreign MNC.
FEMA compounding of past breaches: use pre-Budget window to voluntarily compound before any policy tightening.

Last updated: 2026-10-22.

/ Ready when you are

Pre-Budget 2026 planning window is now (Oct-Dec 2026).

Capital gain reinvestment, TP documentation, FEMA compounding, DPDP readiness, Section 115BAB election. BQP: comprehensive pre-Budget engagement scoped to your position.

Get a firm quote → WhatsApp Durgesh

FAQ

Common questions, answered.

When is Union Budget 2026-27 expected?

Early February 2027 - Finance Minister typically presents Union Budget on 1 February. Budget 2026-27 covers Finance Act 2027 provisions applicable to FY 2027-28. Pre-Budget consultations happen through October-December 2026.

Will angel tax Section 56(2)(viib) return?

Unlikely. Finance Act 2024 fully abolished Section 56(2)(viib) for all funding rounds (not just DPIIT startups). Government has signalled startup-friendly stance; political direction suggests no reversal. Historical pre-abolition cases will continue to litigate but new transactions post-Finance Act 2024 are exempt.

Is Direct Tax Code 2026 going to be legislated?

Direct Tax Code consolidation has been in discussion for over a decade. Current indications suggest Budget 2026 may introduce DTC in some form - either as a comprehensive new act replacing Income Tax Act 1961, or as significant consolidating amendments to Income Tax Act. Watch pre-Budget consultation signals through December 2026.

How should foreign companies plan around DPDP operational Rules?

Draft Rules circulated January 2025. Final notification expected by Budget 2026. Significant Data Fiduciary notifications pending. Foreign companies should: audit personal data flows against draft Rules, prepare consent architecture + notice drafts, appoint Data Protection Officer (if likely SDF), structure cross-border transfer under Section 16 framework.

What should Indian subsidiaries of foreign MNCs do pre-Budget 2026?

Four actions: (1) Form 3CEB TP documentation + benchmarking for FY 2025-26. (2) FEMA compliance review + voluntary compounding of past breaches. (3) BEPS Pillar 2 impact analysis if in-scope (group revenue > EUR 750M). (4) DPDP operational Rules readiness. (5) Section 115BAB opt-in decision if new manufacturing.

Does BQP provide pre-Budget advisory for startups + NRIs + foreign companies?

Yes - scoped pre-Budget planning engagements covering: tax position optimisation, FEMA compliance audit, TP documentation, DPDP readiness, capital gain reinvestment planning, Section 115BAB election, GSTR-9 reconciliation. Timed to current December 2026 - February 2027 planning window. WhatsApp +91 78018 87130.