10 key reforms tech sector wants for innovation and development – Firstpost

As India prepares for the Union Finances 2025-26, the expertise sector anticipates key coverage reforms and financial incentives to drive innovation, funding, and ease of doing enterprise. Beneath are 10 necessary areas for this sector which require consideration.

2. Incentives for knowledge centres, cloud computing and AI

A sturdy knowledge centre infrastructure is important for India’s Digital India imaginative and prescient. Introduction of tax holidays or concessional tax charges (corresponding to 15 per cent) for knowledge centres, much like previous incentives for the software program trade, can be useful for the sector. Increasing the Manufacturing-Linked Incentive (PLI) scheme to incorporate knowledge centre {hardware}, cloud computing and AI enterprises would moreover appeal to international funding and bolster India’s place as a world digital hub.

3. Increasing R&D and AI investments

Synthetic intelligence, blockchain, and quantum computing are driving the following digital revolution. The upcoming finances is anticipated to introduce focused R&D tax incentives, grants for AI startups and public-sector investments in AI-driven governance. It is usually anticipated that the proposed India AI Mission will assist AI skilling programmes, cloud-based AI infrastructure and startup incubators.

4. Reforms for tech startups

To foster innovation, startups may considerably profit from a single-window clearance for regulatory licenses and approvals, parity in long-term capital positive factors tax charges for listed and unlisted markets and capital positive factors tax exemptions for reinvestments. Moreover, readability on abroad direct itemizing guidelines would supply startups with larger fundraising flexibility.

5. Tax reforms for ease of doing enterprise

Simplified tax laws additionally stay a prime precedence. Rationalisation of capital positive factors tax, clarification on withholding tax regimes, improved tax dispute administration and harmonisation of Advance Pricing Agreements (APA) and Secure Harbour Guidelines – are all areas the place some work and collaboration is required between trade and authorities, to cut back compliance burdens.

6. Ability Growth

It is usually a necessity of the hour to develop skilling initiatives underneath the Ability India Mission and deal with rising applied sciences like AI, robotics, and cybersecurity to bridge talent gaps and meet workforce calls for.

7. GST and TCS aid for E-commerce and digital funds

E-commerce platforms face cumbersome GST Tax Collected at Supply (TCS) obligations, particularly on zero-rated (export) provides. Requiring exporters to pay GST TCS and later declare refunds creates money stream challenges. Many trade individuals have proposed eliminating GST TCS on exports to ease monetary pressure.

8. Strengthening Cybersecurity, Knowledge Safety, and AI Ethics

With rising digital transactions, cybersecurity investments are essential. The expertise sector anticipates devoted finances allocations to boost cybersecurity frameworks, promote safer digital transactions, and strengthen knowledge privateness measures aligned with the Digital Private Knowledge Safety (DPDP) Act. Clearer pointers on knowledge privateness and cost-effective consent administration frameworks by way of the extremely anticipated guidelines may even improve compliance.

Tax incentives for cybersecurity infrastructure, AI-driven fraud detection, and moral AI practices would speed up adoption and resilience. Encouraging accountable AI growth by way of authorities initiatives may additional place India as a pacesetter in moral AI deployment.

9. Incentives for electronics manufacturing

Increasing the PLI scheme to cowl a broader vary of digital elements would scale back import dependence and enhance home manufacturing. On this regard, responsibility reductions on digital elements such to decrease prices for home meeting items, will definitely assist.

10. Tax Certainty for software program, telecom and digital digital belongings

The tax remedy of software program gross sales and telecom companies by non-residents stays a contentious problem. Regardless of a Supreme Courtroom ruling in Engineering Evaluation Centre of Excellence Pvt Ltd vs CIT, tax authorities proceed to categorise software program funds as royalties. Clarifications in Finances 2025-26 would scale back litigation and supply certainty for world software program companies working in India. Moreover, the taxation of Digital Digital Belongings (VDAs), together with cryptocurrencies and NFTs, stays an space of ambiguity. A well-defined tax construction, addressing elements like capital positive factors remedy, GST applicability, and offset mechanisms for losses, would supply much-needed readability and foster a extra regulated digital asset ecosystem.

11. Encouraging inexperienced and sustainable tech

The finances presents a possibility to align India’s expertise development with sustainability. Incentives for inexperienced knowledge centres, tax breaks for energy-efficient cloud infrastructure, and elevated funding for climate-tech improvements may place India as a pacesetter in sustainable digital development.

The Union Finances 2025-26 has the potential to be a game-changer for India’s expertise sector. Addressing taxation complexities, fostering digital infrastructure, supporting AI and data-driven innovation, easing e-commerce compliance and strengthening cybersecurity can speed up India’s transformation right into a trillion-dollar digital financial system.

As a expertise lawyer, I anticipate coverage shifts that can improve ease of doing enterprise and create a sturdy authorized framework for digital transactions, taxation, AI, and knowledge governance. With the fitting fiscal and regulatory measures, India can place itself as a world chief in expertise innovation, funding and entrepreneurship.

The creator is Companion, IndusLaw. Views expressed within the above piece are private and solely these of the creator. They don’t essentially replicate Firstpost’s views.