India’s Union Budget 2026–27: Key Highlights

Last Updated on February 3, 2026

The Budget 2026 is presented as being inspired by three ‘kartavya’ framing:

1. fostering and sustaining development,
2. improving human capacity, and
3. allowing everyone simple access to resources and chances (Sabka Sath, Sabka Vikas).

Rather than stressing tax cuts, the Indian budget plan emphasises growth with a consistent approach to financial consolidation. While trying to reduce the deficit, the government wants to keep up with its capital investments and reform projects.

Union Budget 2026 Highlights: Tax Changes, MSME Benefits & Key Announcements

A. Financial condition of the government and macroeconomic patterns

1. Major fiscal indicators (BE 2026–27)

• The overall cost will be ₹53.5 lakh crore.
• Non-debt revenues are estimated to be ₹36.5 lakh crore; net tax revenues should be ₹28.7 lakh crore.
• Gross market borrowings are projected at ₹17.2 lakh crore, whereas net market borrowings (dated securities) are expected to be ₹11.7 lakh crore.
• Compared to 4.4% in FY 2025-26 RE, the fiscal deficit for FY 2026–27 is aimed for 4.3% of GDP.
• From 56.1% in FY 2025-26, the debt-GDP ratio is predicted to be 55.6% in FY 2026-27 BE.

B. Support growth and investment in manufacturing, MSMEs, infrastructure, and logistics.

2. Boosting manufacturing in “7 critical and emerging sectors.”

• Biopharma SHAKTI: An investment of ₹10,000 crore over five years to make India a global hub for biopharma manufacturing.
• Development of the biopharma sector: Establishment of 3 new NIPERs and upgradation of 7 existing institutions.
• Creation of a network of over 1,000 accredited clinical trial sites.
• The India Semiconductor Mission (ISM) 2.0 is centred on equipment/material, comprehensive Indian IP, supply chain sustainability, and industry-led R&D and training.
• The budgetary support for the Electronics Components Manufacturing Scheme has increased to ₹40,000 crore.
• Rare Earth Corridors help mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in the domains of mining, processing, R&D, and manufacturing.
• Support to the government to set up three chemical parks using a challenge/cluster plug-and-play approach.
• Central Public Sector Enterprises (CPSEs) provide advanced tool rooms at two locations. Proposed upgradation of Construction and Infrastructure Equipment (CIE). The container manufacturing scheme has a budgetary allocation of around ₹10,000 crore over a period of 5 years.
• Various schemes, programs and initiatives have been introduced to boost the textile sector.

3. “Champion SMEs” and support to smaller enterprises

• The ₹10,000 crore SME Growth Fund is planned to nurture “future champions” based on incentive criteria.
• The Self-Reliant India Fund has allocated an additional ₹2,000 crore to improve support to smaller enterprises and provide risk capital access.
• ‘Corporate Mitras’ in Tier-II/III cities: Professional bodies (ICAI/ICSI/ICMAI) will provide modular learning and support to help businesses.

4. Infrastructure: spending and risk factors for private sector involvement

• The public capital spending is expected to increase to ₹12.2 lakh crore in FY 2026-27.
• The Infrastructure Risk Guarantee Fund will help to improve the confidence level of private developers with respect to development and construction risks.
• Recycling CPSE real estate through Real Estate Investment Trusts (REITs): Specialised REITs will be used to speed up the recycling of large CPSE assets.

5. Logistics and freight transportation: coastal shipping, corridors, canals

• New freight routes will link Dankuni (East) to Surat (West). Over the following five years, 20 new National Waterways would be built to link mineral and industrial areas with ports, including NW-5 in Odisha.
• Training institutes for the area and a ship repair facility will also be created in Patna and Varanasi.
• By 2047, the Coastal Cargo Promotion Scheme aims to raise inland waterway and coastal shipping usage from 6% to 12% via incentives for modal shift.
• Incentives will be given for the local production of seaplanes and for enhancing connectivity and tourism in isolated regions.
• The Seaplane VGF Scheme will help operations.

6. High-speed rail expansion and City Economic Regions connections

• Via a challenge mode and reform-cum-results funding, City Economic Regions (CERs) will receive ₹5,000 crore over five years.
• Seven high-speed rail lines have been suggested as development links, among these are Mumbai-Pune, Delhi-Varanasi, and Varanasi-Siliguri.

7. CCUS: Climate Technology and Energy Security

Over five years, the Carbon Capture Utilisation and Storage (CCUS) project is expected to cost ₹20,000 crore.

C. Capacity building with a focus on people: education, health, tourism, sports, and creative economy

8. Focus on the service sector and employability

The ‘Education to Employment and Enterprise’ Standing Committee will recommend approaches for the services sector, which is vital for the achievement of “Viksit Bharat.”

9. Health and associated professionals, especially in medical tourism

• The objective is to increase the number of Allied Health Professionals by 100,000 over a period of 5 years through the improvement and expansion of AHP facilities.
• Five Regional Medical Hubs will establish India as a hub for medical tourism services.
• Three new All India Institutes of Ayurveda (AYUSH).

10. The “Orange Economy” (AVGC) and creator labs in schools or colleges

Supported the Indian Institute of Creative Technologies in Mumbai to establish AVGC Content Creator Labs in 15,000 secondary schools and 500 institutions.

11. Education Infrastructure and Facilities for Women

• The Challenge route connects 5 university townships to important industrial/logistics routes.
• Each district will have one girls’ hostel funded through VGF/capital support.

12. Tourism, Heritage, and Sports

• The National Council for Hotel Management and Catering Technology will be renamed as the National Institute of Hospitality.
• A 12-week blended course has been designed to train 10,000 guides in 20 tourism destinations, in partnership with IIMs.
• The National Destination Digital Knowledge Grid is planned to digitally record cultural, spiritual, and heritage sites.
• Fifteen archaeological sites will be repurposed as immersive cultural experiences (see PIB release for details).
• The Khelo India Mission is expected to give a boost to the sports sector in the coming decade.

D. Reforms in the financial sector and capital markets

13. Banking/NBFC Structure and Investment Regulations

• A high-level committee named “Banking for Viksit Bharat” will assess the sector for its next phase of growth, with a focus on stability, inclusiveness, and consumer protection.
• Overhaul of public sector NBFCs to increase scale and efficiency.
• The FEMA (Non-Debt Instruments) Rules have been examined to make them more investor-friendly for foreign investors.
• Municipal bonds offer a ₹100 crore incentive for single bond issues above ₹1,000 crore, encouraging large city issuances.

E. Changes in direct taxes

14. Income tax brackets

• No changes in rates, but significant changes in the area of compliance.
• Live coverage suggests that there are no changes in tax brackets or standard deductions, but rather a focus on simplifying and streamlining compliance.

15. The New Income Tax Act Framework

The new Income Tax Act, 2025, will come into effect in April 2026, resulting in more efficient regulations and forms to improve compliance.

16. “Ease of Living” direct tax measures (practical changes perceived by taxpayers)

• Interest awarded to natural persons by the Motor Accident Claims Tribunal is exempt from TDS.
• The TCS rate on foreign tour packages has been lowered to 2% from the existing rate in PIB.
• TCS on LRS remittances for education/medical purposes has been reduced to 2% (reduced from 5%).
• TDS provisions have been made simpler for labour-intensive businesses.
• An automated rule-based system for lower/NIL TDS certificates has been introduced, which reduces difficulties in application and assessment.
• Form 15G/15H allows a single-window filing of TDS on dividends and interest through depositories.
• The revision period has been extended from December 31 to March 31 (with a nominal fee), and dates for filing have been staggered.
• In NRI property transactions, the TAN has been replaced by a PAN-based challan of the resident buyer to simplify the process.
• Small taxpayers are allowed to use a one-time foreign asset disclosure system for a period of 6 months to disclose foreign income and assets.

17. Capital markets and corporate tax structures

• Change in buyback taxes: All shareholders will be charged capital gains tax, while promoters will also be charged an additional buyback tax (with specified effective rates in PIB).
• Increase in STT for derivatives:• Increased STT to 0.05% (from 0.02%).
• Increased premium STT to 0.15% (from 0.1%).
• Increased STT to 0.15% (from 0.125%).
• Proposed modifications to MAT include a final tax rate change to 14% (from 15%) and more stringent credit set-off rules to encourage the use of the new tax regime.

F. Indirect taxes: Customs, Excise, Trade Facilitation (and imports under “ease of living”)

18. Simplification of tariffs and specific adjustments to customs duties

• Relief given on export inputs.
• The ceiling for duty-free import of seafood export processing inputs has been raised from 1% to 3% of the FOB value.
• Duty-free import of specified inputs for leather and synthetic footwear exports has been allowed.
• Exemption from BCD on capital goods for the manufacture of lithium-ion cells has been extended.
• Exemption from BCD for sodium antimonate used in the production of solar glass.
• The BCD exemption on imports of nuclear electricity has been extended until 2035.
• BCD exemption on capital goods used in the processing of essential minerals.
• For biogas-blended CNG, the calculation of excise duty is to be done after deducting the total value of biogas (as highlighted in PIB notes).
• BCD exemptions for parts of aircraft and raw materials for MRO in defense sector units.
• BCD exemption for certain parts used in the manufacture of microwave ovens.
• Allow SEZ manufacturing units to sell in DTA at lower rates of duty (up to a certain percentage of exports).
• The tariff rate on dutiable products imported for personal use has been lowered from 20% to 10%.
• BCD exemption for 17 drugs/medicines, and import of drugs/food without duty for 7 more rare diseases.

19. Simplification of customs procedures: trust-based, digital, and rapid approval

• Improved customs procedures for hassle-free travel.
• The period of duty deferment for Tier-2/3 AEOs has been increased from 15 to 30 days, including manufacturer-importers who qualify as such.
• The term of advance rulings has been extended from 3 to 5 years.
• Automatic notifications regarding clearing procedures will be made available to trusted importers after they submit their bills of entry and import the goods (without any compliance requirements).
• Overhauling the warehousing system to include self-declarations, computerised monitoring, and risk-based audits.
• Approvals for cargo clearance from different departments will be handled by a single digital platform, with about 70% of the categories of intercepted cargoes expected to be operational by April 2026.
• The Customs Integrated System (CIS) is scheduled to be rolled out in two years as an integrated system, improving non-intrusive scanning and risk assessment using AI to scan all containers at major ports (in phases).

20. Improvements in export and e-commerce facilities

• Indian ships carrying out fishing activities within the EEZ/high seas will be exempt from duties, with unloading at foreign ports treated as exports.
• The ₹10 lakh value cap for consignments in courier exports has been removed to help small-scale businesses, artisans, and start-ups through e-commerce.
• According to the PIB press release, changes in baggage clearance procedures will be made to increase the duty-free allowance for passengers.

Conclusion

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Union Budget 2026 FAQs

1. Did income tax slabs change in Budget 2026?

No. The income tax slabs and rates for individuals and HUFs remain the same as the previous year. This Budget did not increase or introduce new tax brackets. Instead, the focus was on simplifying compliance and reducing procedural burdens for taxpayers without altering basic tax rates.

2. What benefits did the Budget 2026 provide for startups?

The Budget focused on strengthening the startup ecosystem by ensuring easier access to capital and encouraging innovation. Key supports include enhancement of investment funds, incentives for manufacturing in technology sectors, and simplified compliance under the new Income Tax Act framework from April 2026. These changes aim to reduce regulatory friction and boost investor confidence in Indian startups.

3. Will individual taxpayers see any relief in 2026?

While basic tax rates haven’t been changed, several tax compliance and procedural reliefs have been introduced. These include easier TDS/TCS processes, automated systems for lower TDS certificates, and extended deadlines. These changes are meant to make filing and compliance smoother for salaried and small taxpayers.

4. How does the Budget 2026 impact salaried employees?

Salaried individuals won’t see changes in tax rates, but they will benefit from simplified compliance processes — for example:

• Easier TDS/TCS rules
• One-window filing for certain taxes
• Extended filing dates

These should reduce errors and administrative burden during tax filing.

5. What changes were proposed for capital markets and investors?

The Budget tweaked market-related taxes, including changes to:

• Securities Transaction Tax (STT) on derivatives
• Buyback tax structures
• Dividend and interest TDS facilitation
  These are intended to deepen capital markets and make investment frameworks more efficient over time.