Rohan Bhandare highlights how India Inc. faces regulatory shift reshaping business models, strategies nationwide
India Inc. is on the cusp of a regulatory transition that goes beyond routine amendments and compliance updates. In the coming year, multiple reforms across labour laws, data protection; financial reporting and taxation will take effect simultaneously, collectively reshaping how businesses run their operations and take strategic decisions.
One of the most immediate changes comes from the labour law reform, wherein four Labour Codes replace 29 existing laws with a unified framework covering wages, industrial relations, social security, and occupational safety. The new Labour Codes widen the definition of wages and broaden employee benefit entitlements, creating material long-term obligations even where headline salaries remain unchanged. The guidance issued by the Institute of Chartered Accountants of India now requires that incremental gratuity and leave liabilities be recognised immediately rather than amortised over time. This results in an instant impact on profit and loss statements and a possible strain on the borrowing capacity of enterprises.
Additionally, changes in employment models under the Labour Codes mean businesses will need to reassess contract-labour strategies rather than treat them as cost levers.
Organisations will therefore need to revisit existing payroll structures, reassess workforce planning models, update actuarial assumptions and systems, and incorporate these additional costs into budgets and pricing decisions.
The Digital Personal Data Protection law presents a different but equally material challenge. Until recently, many of us viewed data privacy as a concern only for large technology platforms. In reality, almost every business today handles personal data; be it customer phone numbers, employee records or vendor contact lists. Under the new regime, consent must be explicit and usage must be purpose-bound. Data breaches are no longer merely reputational embarrassments but statutory violations. Enterprises will need to proactively map the personal data they collect, clearly define its purpose, control and monitor access, and put in place robust mechanisms to detect and report data breaches.
Financial reporting is also undergoing reforms to make financial performance more comparable across companies and jurisdictions. The proposed Ind AS 118, which replaces Ind AS 1, marks a fundamental shift by introducing new principles for classifying income and expenses, revised rules for aggregation and disaggregation, updated profit and loss subtotals, and enhanced transparency around management-defined performance measures. While the effective date may appear some distance away, given the scale of the overhaul, enterprises should begin training of finance staff, review their chart of accounts, and set a roadmap with key milestones for a smooth adoption.
Taxation, domestically and internationally, is moving toward a substance-driven paradigm as reflected in the Supreme Court’s ‘Tiger Global’ Ruling on indirect transfer capital gains and the ‘Hyatt’ Ruling on the existence of a permanent establishment. Both landmark judgments upheld the revenue department’s position, and emphasise that economic substance, operational control, and commercial realities will increasingly outweigh formal legal structures in determining tax exposure. Even residency determination, long treated as a cornerstone of Income Tax has come under scrutiny in the ‘Binny Bansal’ Ruling, underscoring the need to factor interpretational risk into every major transaction. In an environment where India seeks to attract more foreign investment, organisations must recognise that tax certainty is increasingly defined by economic substance rather than by paperwork alone.
The latest Income Tax Act, 2025 simplifies statutory language and presents intricate provisions in tabulated form, but the real inflection point will likely come with the announcements at the Union Budget 2026. Long-standing industry expectations around rationalisation of TDS rates and higher thresholds, if addressed, could direct businesses back to the compliance drawing board. Coupled with amended rules and revamped income-tax and TDS return formats, the fresh statute will require organisations to quickly unlearn legacy practices and adapt to a fundamentally new operating framework.
Global trade and customs rules are becoming more fluid as tariff policies and trade actions shift across international markets, and enterprises will need to increasingly account for tariff volatility in pricing and supply chain planning. With industry demands gaining momentum, the Union Budget 2026 could bring relief through customs-duty rationalisation or targeted incentives. Enterprises that identify these trends early will gain a clear competitive edge.
It is a given that regulators are also navigating their own preparedness challenges, from building digital systems and training personnel to issuing clear guidance and ensuring consistency of interpretation during the transition. This, in part, explains why the rollout of several regulations have been calibrated and spread over time.
To sum up, it is now evident that the era of fragmented, box-ticking compliance is drawing to a close. Businesses must shift from procedural responses to a strategic approach, with boards and leadership teams assessing regulatory impact across functions, strengthening internal systems and investing in capacity-building well ahead of time. The choice for business leaders is clear: treat 2026 as a last-minute compliance deadline, or use it as a design milestone to build modern, accountable, and scalable enterprises.
The writer is a practicing Chartered Accountant and Hon.Secretary/Chairman of the Taxation Committee of GCCI. Email: rohanbhandare@gmail.com
