Budget 2026: Nasscom seeks ESOP tax relief expansion and clearer cloud rules to boost startups

Industry asks for tax certainty and easier employee ownership

India’s IT industry body Nasscom has urged the government to adopt startup-friendly tax measures and provide clearer cloud-computing regulations ahead of the Union Budget 2026. The organisation argued that policy certainty on these issues can improve investor confidence and reduce compliance friction for fast-growing technology companies.

One of Nasscom’s key asks is to extend the tax deferment benefit on Employee Stock Option Plans (ESOPs) to a wider set of startups. ESOPs are widely used by startups to attract and retain talent, especially when early-stage companies have limited cash to match big-company salaries.

Cloud regulation clarity: a growing pain point

Nasscom also pushed for clearer guidance on the taxation framework for foreign cloud service providers that operate via Indian data centres. As cloud adoption becomes central to business operations—across banking, retail, manufacturing and government services—uncertainty around regulatory and tax treatment can influence where companies build and host infrastructure.

The industry body’s pitch reflects a broader shift in the tech sector’s expectations from the Budget: not only headline incentives, but also predictable rules that match the scale and complexity of modern cloud and platform-based business models.

Why this matters in Budget season

Budget signals often shape the startup ecosystem’s next phase—affecting talent mobility, capital formation and the willingness of founders to base core operations in India. With more startups maturing into larger employers, policies on ESOP taxation and cloud compliance can have direct consequences for hiring, innovation and long-term competitiveness.

• Nasscom has sought broader ESOP tax deferment coverage for startups.
• It also asked for clarity on cloud taxation and regulation, including for foreign cloud providers using Indian data centres.
• The demands reflect the sector’s push for predictable policy and reduced compliance ambiguity.
• Budget 2026 is seen by the industry as a moment to strengthen the innovation ecosystem’s operating environment.