Union Budget 2026-27 Highlights: Key Reforms, Income Tax Changes, Growth Plans

Union Budget 2026–27 Highlights present the Indian government’s financial plan for FY 2026–27, detailing projected revenues, expenditures, and policy initiatives aimed at supporting growth while maintaining fiscal consolidation. Presented in Parliament on 1 February 2026, the Budget sets the official fiscal roadmap for the upcoming year.

The Union Budget 2026–27 focuses on accelerating economic growth through higher capital expenditure, manufacturing expansion in key sectors, infrastructure development, energy security, and high-speed rail corridors. It maintains fiscal discipline with a 4.3% fiscal deficit and gradual debt reduction while strengthening SMEs and legacy industries.

The Budget also emphasizes human capital development, farmer welfare, healthcare, and regional growth. Major income tax reforms under the New Income Tax Act, 2025 aim to simplify compliance, while indirect tax changes make medicines and essential imports cheaper, supporting inclusive and people-centric development.

Read: Union Budget 2026 Live Updates

Union Budget 2026 Highlights

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 in Parliament. This budget is guided by three main principles, or “Kartavyas” — Growth, Empowerment, and Inclusion, focusing on long-term national resilience and productivity. These Budget 2026 highlights reflect the government’s focus on growth-led development, fiscal consolidation, and people-centric reforms.

Budget Estimates 2026-27

The budget provides a financial outlook. Total expenditure is estimated at ₹53.5 lakh crore. Non-debt receipts are projected at ₹36.5 lakh crore. The Centre's net tax receipts are expected to be ₹28.7 lakh crore.

Capital expenditure remains a key driver of growth, continuing the public investment-led development strategy.

• Fiscal Deficit: The fiscal deficit is estimated at 4.3 percent of GDP for BE 2026-27. This shows a decrease from 4.4 percent in RE 2025-26.

• Debt-to-GDP Ratio: This ratio is estimated at 55.6 percent for BE 2026-27. It was 56.1 percent in RE 2025-26.

Source PIB

First Kartavya: Accelerating Economic Growth

This Kartavya focuses on enhancing productivity and building economic resilience. It outlines six key interventions.

• Scaling Up Manufacturing: This includes seven strategic sectors.

• Biopharma SHAKTI: ₹10,000 crore allocation

• India Semiconductor Mission (ISM) 2.0 launched to strengthen domestic chip manufacturing

• Electronics Components Manufacturing Scheme: Enhanced outlay

• Rare Earth Corridors and Chemical Parks to reduce import dependence

• Capital Goods Capability Programme

• Integrated support for the Textile Sector

• Rejuvenating Legacy Industrial Sectors: A scheme will revive 200 legacy industrial clusters. This improves cost competitiveness and efficiency.

• Creating Champion SMEs: A ₹10,000 crore SME Growth Fund is introduced. The Self-Reliant India Fund gets an additional ₹2,000 crore.

• Infrastructure Push: Public capital expenditure rises to ₹12.2 lakh crore. An Infrastructure Risk Guarantee Fund will be set up. New Dedicated Freight Corridors will connect Dankuni and Surat. 20 new National Waterways will be operationalized. A Coastal Cargo Promotion Scheme will boost shipping. Incentives will promote seaplane manufacturing.

• Energy Security: ₹20,000 crore is allocated for Carbon Capture Utilization and Storage (CCUS).

• Developing City Economic Regions: ₹5,000 crore is allocated per city economic region. Seven Union Budget 2026 high-speed rail corridors are proposed as growth connectors. These include Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri.

The proposed Union Budget 2026 high-speed rail corridors are expected to significantly reduce travel time and act as economic growth engines for connected regions.

Second Kartavya: Fulfilling Aspirations

This Kartavya focuses on human capital development and employment readiness. This Kartavya aims to build people's capacity.

• Professional Creation: A High-Powered 'Education to Employment and Enterprise' Standing Committee will be formed. Allied Health Professional institutions will be upgraded. Five Regional Medical Hubs will be established. Three new All India Institutes of Ayurveda will open. Veterinary professionals will increase by 20,000.

• Education and Tourism: Five University Townships will be created. The National Council for Hotel Management and Catering Technology will be upgraded. 15 archaeological sites will become cultural destinations. The Khelo India Mission will transform sports.

Third Kartavya: Sabka Sath, Sabka Vikas

Ensures equitable access to opportunities and welfare. This Kartavya ensures access to resources for all.

• Farmer Incomes: New initiatives integrate 500 reservoirs and Amrit Sarovars. High-value crops like coconut and cashew receive support. Bharat-VISTAAR, an AI tool, will integrate AgriStack portals.

• Empowering Divyangjan: The Divyangjan Kaushal Yojana will offer task-oriented roles.

• Mental Health and Trauma Care: NIMHANS-2 will be set up in North India. Existing National Mental Health Institutes will be upgraded.

• Purvodaya States and North-Eastern Region: Coast Industrial Corridor will be developed. Buddhist Circuits in the North-East will get a scheme.

Union Budget 2026 - Direct Taxes 

A New Income Tax Act, 2025 comes into effect from April 2026. The forms are redesigned for easy compliance for Income Tax Union Budget 2026

• Ease of Living: Motor Accident Claims Tribunal interest is tax-exempt. TCS rates are rationalized. Overseas tour packages and LRS remittances for education/medical see reduced TCS rates. Small taxpayers get automated certificates.

• Rationalizing Penalty and Prosecution: IT assessment and penalty proceedings are integrated. Taxpayers can update returns after reassessment for reduced litigation. Non-production of books and TDS payment in kind are decriminalized.

• Cooperatives: Deductions are extended to cooperative societies supplying cattle feed and cotton seed. Inter-cooperative society dividend income is deductible.

• Supporting IT Sector: Software development services get a common safe harbor margin of 15.5 percent. The threshold for availing safe harbor is enhanced.

• Attracting Global Investment: Foreign companies using data centers in India get a tax holiday till 2047. Non-residents get income tax exemptions for capital goods.

• Other Tax Proposals: Buyback for all shareholders is taxed as Capital Gains. Promoters pay additional buyback tax. TCS rates for specific goods like alcoholic liquor and tendu leaves are rationalized. STT on Futures and Options is raised. MAT is proposed to be a final tax with a reduced rate of 14 percent. This provides details on what is cheaper and what becomes expensive

While the Union Budget 2026 income tax slab structure will now be governed under the New Income Tax Act, 2025, the emphasis remains on clarity, fewer disputes, and predictable taxation.

Source PIB

Union Budget 2026 - Indirect Taxes 

Tariff Simplification aims to ease trade.

• Marine, Leather, Textile Products: Duty-free import limits for seafood processing inputs increase. Duty-free imports for leather/synthetic footwear are allowed.

• Energy Transition and Security: Customs duty exemption for Lithium-Ion cells and sodium antimonate continues.

• Nuclear Power and Critical Minerals: Exemptions extend to nuclear power project imports and capital goods for critical mineral processing.

• Biogas Blended CNG: The biogas value is excluded from Central Excise duty calculation.

• Civil and Defence Aviation: Customs duty on components for civilian and defence aircraft manufacturing is exempted.

• Electronics: Customs duty on specific microwave oven parts is exempted.

• Special Economic Zone (SEZ): A measure that facilitates sales by SEZ manufacturing units to the Domestic Tariff Area at concessional rates.

• Ease of Living: Tariff rate on dutiable goods for personal use reduces from 20% to 10%. Basic customs duty on 17 drugs/medicines is exempted. Duty-free personal import of drugs for 7 rare diseases is allowed. These measures clearly answer the question of Union Budget 2026 what is cheaper, especially for medicines, personal imports, and essential healthcare needs.