Budget 2026: Nasscom seeks startup-friendly ESOP tax relief and clearer rules for cloud services
Ahead of Union Budget 2026, Nasscom has asked the government to extend tax deferment on ESOPs to a wider set of startups and to clarify cloud regulation and taxation rules for overseas cloud providers using Indian data centres, aiming to reduce uncertainty for investors and founders.
Industry pitch before Budget day
India’s IT industry body Nasscom has urged the government to adopt startup-friendly tax measures and provide greater clarity on cloud-related rules ahead of Union Budget 2026. In its recommendations, Nasscom highlighted how regulatory certainty—especially around employee compensation and cross-border digital infrastructure—can influence investment and hiring plans across the tech ecosystem. ([timesofindia.indiatimes.com](https://timesofindia.indiatimes.com/business/india-business/budget-2026-nasscom-pushes-for-startup-friendly-tax-policies-cloud-regulation-clarity/articleshow/127547171.cms?utm_source=openai))
Among the headline requests is an expansion of the tax deferment on Employee Stock Option Plans (ESOPs) so that more startups and employees can benefit. Founders argue that ESOPs are a key tool to retain talent when cash compensation is constrained, and that tax timing can materially affect take-home value and willingness to accept equity-heavy pay packages. ([timesofindia.indiatimes.com](https://timesofindia.indiatimes.com/business/india-business/budget-2026-nasscom-pushes-for-startup-friendly-tax-policies-cloud-regulation-clarity/articleshow/127547171.cms?utm_source=openai))
Cloud regulation clarity: what Nasscom wants fixed
Nasscom also sought clearer guidelines on how foreign cloud service providers should be taxed when they operate through Indian data centres. The group’s pitch is that predictable rules can lower compliance friction and encourage more infrastructure investment and deeper enterprise adoption of cloud services in India—both crucial for AI workloads and digital public infrastructure at scale. ([timesofindia.indiatimes.com](https://timesofindia.indiatimes.com/business/india-business/budget-2026-nasscom-pushes-for-startup-friendly-tax-policies-cloud-regulation-clarity/articleshow/127547171.cms?utm_source=openai))
In recent years, cloud has moved from a back-office IT decision to a strategic choice that touches data governance, cybersecurity and national competitiveness. Uncertainty around tax exposure for service providers can flow downstream into pricing, contract terms and the willingness of global firms to expand local capacity.
Why ESOP taxation keeps coming up
ESOP policy is one of the most persistent asks from India’s startup industry because it intersects with talent mobility, valuations and retention in a competitive job market. A broader deferment regime would, in Nasscom’s framing, help smaller and mid-sized startups compete with large firms on compensation without creating immediate cash-flow pain for employees at the time of exercising options. ([timesofindia.indiatimes.com](https://timesofindia.indiatimes.com/business/india-business/budget-2026-nasscom-pushes-for-startup-friendly-tax-policies-cloud-regulation-clarity/articleshow/127547171.cms?utm_source=openai))
With Budget 2026 approaching, Nasscom’s note is part of a wider pre-budget push from industry groups seeking measures that unlock private investment while keeping compliance simpler in fast-moving sectors such as cloud, AI and fintech. ([timesofindia.indiatimes.com](https://timesofindia.indiatimes.com/business/india-business/budget-2026-nasscom-pushes-for-startup-friendly-tax-policies-cloud-regulation-clarity/articleshow/127547171.cms?utm_source=openai))