India’s Union Budget 2025–26 signals a bold push toward “Make in India 2.0”, prioritizing capital-intensive manufacturing, green energy, and digital infrastructure. With ₹1.6 lakh crore earmarked for renewable transitions and extended tax holidays for new manufacturing under Section 115BAB, the budget offers direct fiscal benefits to eligible corporates. However, these incentives come with conditions outlined by CBDT, DPIIT, and MCA, requiring careful legal and financial interpretation.
For global investors and Indian corporates alike, partnering with a seasoned corporate advisory firm like KNM is key. KNM supports clients in structuring Fund of Funds applications, optimizing capital infusion strategies, and securing state and central-level incentives—all within compliant, audit-ready frameworks.
Key Corporate Finance Incentives Announced in Budget 2025–26
India’s Budget 2025–26 underscores its commitment to attracting global capital and strengthening domestic manufacturing through targeted corporate finance incentives. The 15% concessional tax rate under Section 115BAB has been extended till March 31, 2027, benefiting new manufacturing companies and project-based SPVs. Additionally, enhanced allocations under the Production Linked Incentive (PLI) schemes—especially for electronics, EVs, and pharmaceuticals—signal deeper government support. DPIIT notifications confirm extended sectoral coverage and increased eligibility thresholds.
The start-up ecosystem gains from extended tax holidays (Section 80-IAC) and higher angel investment limits. KNM supports global investors with Government Incentives Advisory, helping structure claims, apply under Fund of Funds, and align financing structures to maximize benefits under Budget 2025–26—ensuring compliance with CBDT, DPIIT, and RBI norms.
Indirect Tax and GST Incentives Impacting Corporate Structures
Budget 2025–26 introduces critical GST and customs reforms aimed at enhancing operational efficiency and capital deployment for global businesses in India.
Customs Duty Rationalization
The reduction in customs duties on capital goods, EV components, and select semiconductors promotes import substitution and lowers setup costs for foreign manufacturers. The amendment aligns with the Make in India initiative and complies with Section 25 of the Customs Act, 1962.
Input Tax Credit Clarification for Group Entities
Recent CBIC circulars and GST Council rulings simplify Input Tax Credit (ITC) for inter-company transactions under a common PAN, clarifying Rule 39 and Section 16 of the CGST Act. This benefits holding subsidiaries and shared-service arrangements.
KNM assists global clients in leveraging these changes, from applying under Fund of Funds schemes to structuring GST-efficient entities and optimizing capital investment incentives.
Financial Structuring under Budget 2025–26: What’s Changed?
India’s Budget 2025–26 brings notable shifts in corporate finance structuring—especially relevant for global entities operating through subsidiaries or JVs. The thin capitalization rule under Section 94B of the Income Tax Act continues to restrict interest deductions for related party debt exceeding INR 1 crore, impacting aggressive debt-equity models. Simultaneously, RBI’s updated FEMA circulars on External Commercial Borrowings (ECBs) now permit higher sectoral caps and relaxed end-use norms for infrastructure and green projects.
KNM’s Corporate Advisory experts guide clients through these complexities—optimizing capital stack design, applying for Fund of Funds support, structuring incentive-linked entities, and ensuring RBI and CBDT compliance across financing layers. This is especially crucial for MNCs seeking efficient inbound capital structuring in India.
Compliance Reliefs and Procedural Reforms: A Boon for Global Investors
India’s Budget 2025–26 underscores the government’s push for ease of doing business—especially for global investors—through landmark procedural reforms. The Ministry of Corporate Affairs (MCA) has reinforced its SPICe+ system, enabling fast-track company incorporation and single-window clearances for approvals like GST, EPFO, ESIC, and DIN. Simultaneously, the CBDT’s enhanced Faceless Assessment 2.0 ensures seamless, bias-free tax scrutiny with centralized processing and improved appellate mechanisms.
KNM supports clients in navigating these reforms through full-spectrum regulatory assistance—structuring incentive claims under Fund of Funds schemes, filing under Section 115BAB for concessional tax rates, and optimizing project financing. For foreign companies, KNM ensures FEMA, MCA, and DPIIT compliance, streamlining all applications and approvals under a single advisory window.
Key Sectors Benefiting Most from Budget Incentives
India’s Budget 2025–26 prioritizes strategic sectors that align with global investment trends and sustainability goals. Electronics and semiconductor manufacturers now benefit from enhanced capital subsidies and tax relief under the extended PLI scheme, while electric mobility firms gain duty exemptions on key battery components. Green hydrogen and solar energy projects receive viability gap funding and GST waivers, as outlined by MNRE and CBIC notifications. MedTech and Pharma ventures enjoy 200% weighted R&D deductions under Section 35(2AB). Global IT and data center investments now qualify for accelerated depreciation benefits.
KNM assists clients in structuring FDI routes, applying under Fund of Funds schemes, and optimizing tax and fiscal incentives, ensuring full compliance with RBI, SEBI, and DPIIT guidelines.
How KNM Helps Foreign Businesses Unlock Budget Incentives
Navigating India’s Budget 2025–26 requires more than just awareness—it demands precision. KNM offers a dedicated Government Incentives Advisory to help foreign businesses assess eligibility for schemes like the Fund of Funds for Startups, PLI schemes, and sector-specific grants under DPIIT. Our team assists with end-to-end compliance, including documentation, audit trails, and timely submissions per MCA and CBDT guidelines. Through robust financial structuring, we help entities choose the right entry vehicle—subsidiary, LLP, or branch—while optimizing tax under Sections 115BAB and 80-IAC. We also coordinate with regulatory authorities like SEBI, RBI, and DPIIT to ensure incentive claims are structured correctly and fully compliant, unlocking maximum value from government reforms.
Final Thoughts: Act Now to Capture Strategic Incentives
India’s Budget 2025–26 offers targeted financial opportunities—but most schemes come with strict eligibility windows, application formalities, and compliance thresholds under MCA, DPIIT, and CBDT frameworks. Delayed action may disqualify your business from claiming key incentives such as Section 115BAB tax relief, capital subsidies, or benefits under the Startup India Fund of Funds.
At KNM, our Corporate Advisory team ensures timely identification, claim structuring, and legal documentation to help both foreign and Indian businesses unlock maximum value. From advising on Fund of Funds eligibility to optimizing FEMA-compliant financing, we provide full-spectrum support tailored to your sector and entry model. Book a consultation today.
