Steering the Finance Function Through Union Budget 2026–27
05 Feb 2026Professional Services
A CFO Perspective on Accounting, Tax, Compliance and Capital Discipline.
Union Budget 2026–27, presented on 1 February 2026, represents a structural recalibration of India’s fiscal and regulatory framework. Anchored around the Government’s three kartavya which are accelerating growth, building capacity and ensuring inclusive development the Budget signals a decisive shift from rule‑intensive oversight to trust‑based, technology‑enabled governance.
What Budget 2026–27 Changes for Companies?
Macroeconomic Stability and Financial Reporting
The Government’s continued commitment to fiscal consolidation targeting a fiscal deficit of 4.3% of GDP alongside a declining debt‑to‑GDP trajectory, provides a stable macroeconomic foundation for corporate planning.For finance leaders, this stability directly influences discount rates, valuation assumptions, impairment testing, long‑term provisioning, and capital allocation decisions. The emphasis shifts from managing macro volatility to ensuring internal consistency, forecast reliability, and audit defensibility.
Income‑tax Act, 2025: Resetting Corporate Compliance
The Income‑tax Act, 2025, effective 1 April 2026, simplifies the tax framework through integrated assessment and penalty proceedings, redesigned returns, staggered filing timelines and wide‑ranging decriminalization of technical defaults. Tax outcomes will increasingly be driven by the quality of documentation, consistency of positions and application of professional judgement, rather than procedural rigidity. While this reduces friction and litigation, it simultaneously raises expectations from the controllership and governance functions.Ind AS–ICDS Convergence: Accounting as the Tax Base
The proposed integration of Income Computation and Disclosure Standards into Indian Accounting Standards eliminates the need for parallel tax accounting from FY 2027–28.Accounting outcomes relating to revenue recognition, foreign exchange, provisions, estimates, construction contracts and borrowing costs will directly determine taxable income. Accounting policy choices, therefore, become tax‑determinative, elevating the strategic importance of sound and defensible accounting judgments.
MAT Finalization: Balance Sheet and Forecasting Implications
The Minimum Alternate Tax is proposed to become a final tax at a reduced rate of 14%, with no further accumulation of MAT credits after 1 April 2026. Utilization of existing MAT credit will be limited to companies under the new tax regime and capped at 25% of annual tax liability.CFOs must reassess deferred tax assets linked to MAT, revisit multi‑year tax forecasts and re‑evaluate decisions around regime migration, dividend policy and capital structure.
Public Capex and Infrastructure Push: Growth with Financial Discipline
With public capital expenditure increased to ₹12.2 lakh crore for FY 2026–27, sectors such as infrastructure, EPC, capital goods and logistics will benefit from enhanced order‑book visibility. However, long‑duration contracts heighten sensitivity around revenue recognition, contract assets, milestone billing, and working‑capital cycles. CFOs must ensure that growth ambitions are matched with balance‑sheet resilience and execution discipline.Decriminalization and Predictable Penalties
The conversion of multiple technical defaults into fixed fees reinforced by Jan Vishwas Bill 2.0, reduces criminal exposure and brings predictability to compliance costs.This enables clearer provisioning, improved contingent liability assessment and a strategic shift from dispute management to preventive governance.
Transfer Pricing Certainty and Global Operating Models
The consolidation of IT and related services into a single category with a safe harbor margin of 15.5%, higher thresholds and automated approvals enhances certainty for global delivery models.Combined with incentives for global cloud services operating from India, the focus moves decisively from negotiation to consistency, documentation quality and operational discipline.
Indirect Taxes: Cash‑Flow Efficiency with Higher Accountability
GST and customs reforms emphasize faster refunds, trust‑based clearances and reduced intervention.While these measures improve cash flows, they also increase reliance on internal systems. ERP integrity, reconciliation discipline and master‑data accuracy become core finance risks rather than operational afterthoughts.
Conclusion
Union Budget 2026–27 moves the finance function from policy interpretation to execution discipline. The emphasis on fiscal consolidation, sustained public investment, and simplified regulation reduces structural uncertainty for businesses. For CFOs, this Budget enables a shift in focus from managing ambiguity to making deliberate, long-term financial and capital decisions.What stands out for CFOs is how decisively the Budget elevates accounting quality and financial judgement. With tax outcomes increasingly anchored to accounting standards, MAT becoming a final tax, and procedural defaults losing their criminal overhang, the margin for weak controllership narrows. This is not a regime that rewards aggressive positions or post-facto fixes; it rewards well-reasoned policies, consistency, and strong documentation.
The real challenge, and opportunity, lies in execution. As public investment crowds in private capital and growth opportunities expand across infrastructure, manufacturing and services, CFOs will need to guard against growth that strains cash flows or weakens balance sheets. Union Budget 2026–27 reinforces a clear message: financial leadership in the coming years will be defined by discipline, credibility and the ability to convert reform into sustainable results. In this environment, the CFO is no longer just a financial gatekeeper, but a central architect of corporate resilience.
