India's 2026 Budget Backs AI
India's 2026 budget signals a strong commitment to artificial intelligence, with specific allocations for AI-powered agricultural technology and rural digital infrastructure. The budget also introduces an electronic system to streamline the issuance of lower or nil TDS certificates, aiming to simplify tax compliance and improve cash flow for startups.
- The budget allocates ₹1,000 crore to the IndiaAI Mission for fiscal year 2026-27, which is part of a larger five-year, ₹10,371.92 crore outlay. This mission plans to expand the nation's sovereign AI compute capacity to over 58,000 GPUs, offering them at subsidized rates to startups and researchers. - A new ₹1 lakh crore fund for Research, Development, and Innovation (RDI) was introduced to provide long-term financing for deep-tech sectors, including AI. This is complemented by a significant increase in the outlay for the Electronic Component Scheme to ₹40,000 crore and the launch of the India Semiconductor Mission 2.0 to build domestic hardware capabilities. - To attract investment in digital infrastructure, a long-term tax holiday is proposed until 2047 for foreign cloud service providers that operate their global services from data centers located in India. This policy aims to localize a greater share of data processing, as India currently generates about 20% of the world's data but stores most of it overseas. - For startups, the incorporation eligibility deadline for a three-year tax holiday under Section 80-IAC has been extended to March 31, 2030. The turnover ceiling to qualify for this benefit has also been increased from ₹100 crore to ₹150 crore. - The government has established a high-powered committee focused on "Education to Employment and Enterprise" to audit AI's impact on the job market and align technical training with the needs of the digital economy. This includes initiatives like setting up AI-focused Content Creator Labs in 15,000 schools and 500 colleges. - In Bangalore's ecosystem specifically, the state government of Karnataka recently launched "Elevate NxT," a program with a ₹150 crore corpus to provide grants of up to ₹1 crore for deep-tech startups. This aligns with the state's 2025-2030 startup policy, which aims to foster 25,000 new startups with an emphasis on growth in cities beyond Bangalore.
