Budget 2026 has reinforced India’s telecom sector as the backbone of the country’s digital transformation, accelerating the shift toward advanced, inclusive and future-ready networks. According to Vishal Malhotra, Partner and National Tax Leader, Technology Media Telecom and South, EY India, the Budget reflects strong policy continuity and a clear vision for a Samaveshit, Viksit, Tvarit and Surakshit digital ecosystem.
India’s telecom industry has played a pivotal role in driving economic and social inclusion, supported by rapid 5G deployment and expanding connectivity across rural and underserved regions. Government initiatives such as BharatNet, Digital Bharat Nidhi, 100 5G Labs and ongoing 6G research continue to strengthen network reach and digital capabilities, positioning telecom as a foundational enabler of the digital economy.
A key highlight of Budget 2026 is the enhanced outlay of INR73,990 crore for the Department of Telecommunications for 2026-27. This allocation, covering USOF-backed infrastructure expansion and BharatNet, underlines the Government’s commitment to rural broadband, public sector-led network expansion and long-term infrastructure development. These measures are expected to deepen digital inclusion and improve service availability nationwide.
The Budget also places strong emphasis on domestic manufacturing and supply chain resilience. The launch of India Semiconductor Mission 2.0 aims to produce telecom equipment and materials, design full-stack Indian intellectual property and fortify critical supply chains. In parallel, the Electronics Components Manufacturing Scheme has been expanded with an enhanced allocation of INR40,000 crore, building on the success of earlier phases that attracted investments well beyond initial targets.
Fiscal incentives announced in Budget 2026 are set to boost investments in digital infrastructure. Long-term income-tax exemptions for specified data center services have been extended until 31 March 2047, providing clarity and certainty for global and domestic investors. Additional tax relief for foreign companies supplying capital goods and equipment to contract manufacturers in custom bonded areas, along with an extended tax holiday for IFSC units, further strengthens India’s attractiveness as a telecom and digital hub.
The Budget also introduces significant direct tax reforms impacting the telecom and technology ecosystem. The reduction of the MAT rate from 15 percent to 14 percent, safe harbour margins of 15.5 percent for IT services with a higher threshold of INR2,000 crore, and faster APA mechanisms are expected to reduce litigation and improve ease of doing business. Amendments to integrate ICDS into Ind AS and rationalization of penalties signal a move toward greater compliance simplicity and certainty.
On the indirect tax front, extended validity of customs advance rulings, enhanced duty deferral for Authorised Economic Operators and GST clarifications on discounts and place of supply of intermediary services are likely to improve tax certainty and operational efficiency for telecom operators and equipment suppliers.
India’s telecom sector has already demonstrated its growing economic significance. Total telephone connections have increased from around 933 million in 2014 to over 1.2 billion by November 2025, while tele-density has risen from 75 percent to 86.8 percent, driven largely by rural growth. The sector now contributes about 1.2 percent to India’s gross value added and supports multiple industries in a technology-driven economy.
Government-led technology initiatives, including the AI Mission, National Quantum Mission, R and D and Innovation Fund, and platforms such as Bharat-VISTAAR, are transforming telecom networks from basic connectivity providers into strategic platforms for next-generation digital services. At the same time, strong export performance, including over 51 percent year-on-year growth in telecom instruments in FY25 and declining imports, highlights progress in import substitution aligned with the PLI framework.
Overall, Budget 2026 reinforces India’s telecom ecosystem through a balanced mix of infrastructure investment, fiscal incentives, domestic manufacturing support and next-generation technology adoption. While challenges related to statutory levies and GST compliance persist, the policy momentum created by the Budget sets the stage for sustained growth, innovation and enhanced global competitiveness, firmly positioning telecom at the core of India’s journey toward a Viksit Bharat.
