What do start-ups seek from Union Budget 2026?
What's the story
As the Union Budget 2026 approaches, India's start-up ecosystem is keeping a close watch on potential changes. The focus is on unlocking domestic risk capital, reviving angel investing, and boosting the country's artificial intelligence (AI) ambitions. After a year of global funding challenges and increased regulatory scrutiny, founders and investors are hoping for measures that would enable early-stage capital formation.
Tax reforms
LTCG, STT rationalization critical for investor confidence
Addison Appu, Managing Partner of ThinKuvate, has stressed the need for tax relief on start-up investments in Budget 2026. He said rationalizing long-term capital gains (LTCG) and securities transaction tax (STT) is crucial for investor confidence and income recognition. Appu also suggested revisiting Alternative Investment Fund (AIF) accreditation regulations as they have directly impacted angel participation in India.
Funding concerns
Excessive restrictions on angel funds could stifle innovation
The decline in angel funding after SEBI's September 2025 notification is another major concern. Appu said that while the intent may have been to protect investors, it has resulted in a smaller pool of eligible angel investors. He also warned against excessive restrictions on angel funds, saying they could stifle early-stage innovation by limiting support for start-ups at different stages of development.
Investment flexibility
Family offices need more flexibility to invest in start-ups
Appu has also called for more flexibility for family offices to invest in start-ups. He said current SEBI co-investment rules discourage long-term investors with rigid exit timelines tied to fund life cycles. Key pain points include mandatory investor accreditation, a three times investment cap relative to AIF stakes, and exit restrictions limiting long-term ownership.
Debt funding
Debt funding channels should complement equity
Bruce Keith, the Co-Founder and CEO of InvestorAi, has a more optimistic view on India's equity funding environment. He said founders no longer need to chase offshore money to scale as the Indian equity funding ecosystem is strong. However, he believes the next phase should include stronger debt funding channels so that equity and debt can work in parallel as the ecosystem matures.
AI push
Budget should support foundational, sector-specific AI models
Keith also stressed that Budget 2026 should boost India's AI innovation by supporting foundational, sector-specific models. He called for stronger linkages between start-ups, academia, and centers of excellence. Keith also wants the country's Digital Public Infrastructure (DPI) to play a bigger role in the foundational AI layer so that more start-ups can build applications on top of it.