The Union Budget 2026-27 was presented by Finance Minister Nirmala Sitharaman on February 1, 2026. This is her ninth consecutive budget. The budget is formulated under the themes of inclusive growth, fiscal discipline, and focused spending.
The following article highlights the key announcements and their impact on the lives of individuals, businesses, and the economy as a whole.
Three Core “Kartavyas” (Duties)
The Budget is anchored by three overarching priorities – the “Kartavyas”:
- Boost and maintain economic development.
- Support and fulfil people’s ambitions.
- Ensure inclusive development.
No change in income tax slabs
Despite expectations of a revision, the government has decided to leave income tax slabs unchanged for FY 2026–27. This gives taxpayers continuity and makes financial planning more straightforward.
Alongside this stability, a bigger change is approaching. Tax rules will change from 1st April 2026 with the introduction of the Income Tax Act, 2025. It aims to reduce the compliance burden and simplify tax regulations.
Rare earth corridors, chemical parks
To source critical minerals used in technology and clean energy applications, the Budget has proposed to create a rare earth corridor in India’s resource-rich states, these are Tamil Nadu, Kerala, Odisha, and Andhra Pradesh.
In addition to this, there are plans for chemical parks that bring together facilities for speciality chemicals and advanced materials. This will help further develop India’s manufacturing capacity.
Highest-Ever Capital Spending
The Budget for FY2026-27 has set a Capex outlay of ₹12.2 lakh crore, which is the highest ever. This reflects a sustained commitment toward infrastructure development and key growth sectors.
To achieve this goal, the government is investing more money into infrastructure projects to create jobs and enhance connectivity while also helping to attract investments, which will assist in the sustainability of the economy.
Strong Support for MSMEs
With a view to the importance of micro, small, and medium-scale enterprises (MSMEs) in terms of employment as well as the strength of the economy, the budget has made an announcement regarding the creation of an SME Growth Fund of ₹10,000 crore.
The aim is make it easier for MSMEs to borrow money, and give them professional advice so that they can compete and scale up.
Focus on High-Potential Sectors
Several strategic sectors received focused support:
- Textiles: Launch of the National Fibre Scheme to provide training and improve employment in textiles.
- Biopharmaceuticals: The Biopharma Shakti initiative is a government program to stimulate India’s biopharmaceutical sector & new types of innovative capabilities.
- Critical Minerals & Manufacturing: Support for rare earth processing, value chains of strategic minerals, & advanced manufacturing.
High-Speed Rail Corridors
The Budget includes plans to build seven high-speed rail corridors that will connect key cities in a more sustainable way. These corridors will dramatically change inter-city transport and assist in delivering regional economic integration. The following corridors are proposed:
- Delhi- Varanasi
- Chennai – Bengaluru
- Pune – Hyderabad
- Varanasi – Siliguri
- Mumbai – Pune
- Hyderabad – Chennai
- Hyderabad – Bengaluru
India Semiconductor Mission 2.0
India Semiconductor Mission 2.0 will be rolled out with a strong focus on research, technology development, and training centres, backed by an allocation of ₹1,000 crore in the next year.
The initiative is aimed at boosting domestic semiconductor production, developing a skilled talent pool, and positioning India as an attractive destination for global investment in electronics manufacturing.
Expansion of Ayurveda Institutions
The government plans to set up three additional All India Institutes for Ayurveda to strengthen traditional healthcare.
The focus is on providing greater access to good-quality educational and treatment facilities in Ayurveda, as well as further developing India’s long-term commitment to promote AYUSH globally.
Operationalising New National Waterways
In the next five years, 20 more national waterways will be put into use to promote cleaner and more economical transportation of cargo.
By improving transport efficiency, the project aims to cut logistics costs and support smoother movement of goods.
Education & Skill Development
Several changes have been announced to support education and skill development in the country:
- One women’s hostel in every district for students in Science, Technology, Engineering and Mathematics (STEM) institutions to support higher education.
- A new National Institute of Design (NID) will be set up in eastern India.
- Four new telescope facilities for astrophysics and astronomy
- Training of over 10,000 guides across 20 tourist locations to improve tourism-linked employment
- Five university townships are planned close to industrial hubs
Agriculture & High-Value Crops
The Budget aims to raise farmers’ incomes by promoting high-value crop cultivation. The government is promoting the growing of crops such as cashew and coconut in coastal areas so that they can meet their own local needs and will no longer need to depend on importing them.
Moreover, support will be available for the farmers growing walnuts, almonds and nuts from pine trees. States will be able to provide support to farmers growing sandalwood for the purpose of diversifying their income.
Mahatma Gandhi Gram Swaraj Initiative
This initiative is launched with the purpose to support the khadi, handloom, and handicraft sectors and provide rural areas with a better means of livelihood.
The focus is on helping businesses get into markets all over the world by providing them with branding, marketing, training to build skills, and making sure their quality standards are up to the mark.
Financial Markets & Institutional Reforms
The Budget has proposed measures to improve market liquidity and strengthen capital markets, including plans to restructure the Rural Electrification Corporation (REC) and the Power Finance Corporation (PFC) to enhance their operational efficiency.
It also introduces support for large corporate bond issuances and a market-making framework to improve bond market liquidity. Non-resident individuals will be permitted to invest in Indian equity markets, broadening the pool of investors.
Debt, Fiscal Deficit and Borrowing
The government plans to lower the debt-to-GDP ratio to 55.6% in FY27 from 56.11% in FY26. The reduced debt will help in saving interest payments, and the amount can be put to other uses.
The fiscal deficit is projected to come down to 4.3% in FY27. An amount of ₹11.7 lakh crore is proposed to be raised through dated securities to finance the deficit.
Capex Push for FY27
The government has set the FY27 capital spending target of ₹12.2 lakh crore. The priority remains on infrastructure expansion across Tier-2 and Tier-3 cities. A new Risk Guarantee Fund for the infrastructure sector has been proposed.
The government will back organisations such as the Institute of Chartered Accountants of India (ICAI) and the Institute of Company Secretaries of India (ICSI) in creating short-term courses suited to present-day industry requirements.
Urban & Regional Development
The government has allocated ₹5,000 crores per city over a five year period to develop City Economic Regions and drive growth through urban development. CERs will help cities develop the right conditions for development, establish new business centres, and create jobs.
Tariff Rationalisation
To help manage rising global trade pressures, the government has eased some import duties. Imported goods for personal consumption will be charged reduced duty rates down to 10% from 20%. This will relieve consumers of their cost burden.
The Budget also eliminates customs duties on raw materials used to provide Maintenance, Repair and Overhaul (MRO), as well as on 17 cancer medications. The intention is to reduce costs and improve access to critical medicines.
Relief on Foreign Travel, Education & Medical Expenses
The budget has cut down TCS on foreign tour packages from the earlier 5% and 20% to a flat 2%, with the minimum threshold now removed. This change lowers the upfront tax burden on foreign travel for individuals.
TCS on medical treatment and education under the Liberalised Remittance Scheme (LRS) has been cut to 2% from 5%.
Income Tax Return (ITR) Filing Reforms
The deadline to revise your income tax return has been moved from 31st December to 31st March, at a nominal cost.
Everyone has had their filing deadlines extended as well. You can now file your ITR-1 or ITR-2 by 31st July. Businesses that do not have to be audited, as well as trusts, have until 31st August to file their income tax returns.
To reduce compliance stress, no interest will be charged on penalty amounts when matters are pending before the first appellate authority.
IT Sector Announcements
A single Information Technology Services category will now cover software development, IT-enabled services, KPO, and contract research and development.
Approvals will shift to an automated, rule-driven system, alongside a uniform safe harbour margin of 15.5% and a higher threshold of ₹2,000 crore.
Changes in Buybacks and STT
The tax treatment of share buybacks has been revised, with gains now taxed as capital gains across all shareholder categories.
Derivatives will now attract a higher Securities Transaction Tax. STT on futures has risen from 0.02% to 0.05%. For options, STT on premium and on option exercise has been increased to 0.15%.
Bottomline
Rather than seeking major changes, the Union Budget 2026 takes an even and calm approach to ensuring that all of the funds available are used in a responsible manner, which includes limiting the actual amount spent, while still being committed to balanced overall development. The budget aims at making steady progress through reforms and not rushing towards advancements.
