Union Budget 2026: India Allocates ₹1,000 Crore to Bolster AI via IndiaAI Mission

Union Budget 2026 has outlined a fresh push for artificial intelligence with a dedicated allocation of ₹1,000 crore under the IndiaAI Mission for FY 2026–27.  

While this is lower than the originally proposed outlay last year, it is higher than the revised estimate and signals continued policy backing for AI-led growth. 

Revised AI Allocation and Mission Route 

The finance minister has earmarked ₹1,000 crore for AI initiatives through the IndiaAI Mission, which serves as the government’s primary platform to build national AI capability and global competitiveness.  

Last year’s proposed allocation of ₹2,000 crore has now been revised downward to ₹800 crore in the revised estimates, making the new provision ₹200 crore higher than the revised figure but about half of the original proposal. 

The IndiaAI Mission remains the central channel for deploying these funds across infrastructure, innovation and ecosystem development. 

Tax Incentive for India-Based Data Centres 

Alongside the AI corpus, the Budget proposes a long-term tax holiday for companies that use data centre services located within India, extending the benefit up to 2047.  

The move is aimed at strengthening domestic digital infrastructure and encouraging localisation of compute and storage capacity as AI adoption accelerates across sectors such as defence, enterprise and public systems. 

Policy Context and Governance Push 

The allocation comes after India introduced its first formal AI governance framework in November 2025 through the India AI Governance Guidelines, at a time when major economies have been tightening their regulatory and strategic approach to AI. 

In the Economic Survey released on January 29, Chief Economic Advisor V Anantha Nageswaran cautioned that AI capabilities could become concentrated among a few large players and noted that fully bridging the gap through public funding alone would be financially demanding. 

Read More: Defence Received Record Budget of ₹7.85 Lakh Crore: Up 15% Over Previous Budget! 

Conclusion 

The latest Budget signals continued but calibrated support for AI, combining targeted funding with long-horizon tax incentives to strengthen India’s domestic AI and data infrastructure base. 

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