Union Budget 2026 Key Highlights: What Matters Most for Common Citizens

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Union Budget 2026–27 focuses on growth with discipline, boosting manufacturing, services, MSMEs, infrastructure and welfare while keeping fiscal deficit at 4.3% and targeting Viksit Bharat.

The Union Budget 2026–27, presented by Finance Minister Nirmala Sitharaman on Sunday, lays out the government’s economic roadmap anchored in the principles of Action Over Ambivalence, Reform Over Rhetoric and People Over Populism. Rooted in the vision of Viksit Bharat, the Budget balances ambition with inclusion while reinforcing macroeconomic stability through moderate inflation, sustained growth, fiscal discipline and stability.

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The government aims to sustain a high growth rate of around 7%, driven by reduced critical import dependencies, far-reaching structural reforms, fiscal prudence, monetary stability and a strong thrust on public investment. Citizens are placed at the centre of policy action, with the Budget positioning domestic manufacturing capacity, energy security and infrastructure expansion as key growth drivers.

The stated aim of Budget 2026–27 is to transform aspiration into achievement and convert potential into performance.

Yuva Shakti–Driven Budget and Government’s Sankalp

The Budget is driven by Yuva Shakti and focuses on the poor, underprivileged and disadvantaged sections of society. The government’s Sankalp is aimed at:

  • Accelerating and sustaining economic growth
  • Fulfilling the aspirations of the people
  • Advancing the vision of Sabka Saath, Sabka Vikas

The Three Kartavyas

First Kartavya

  • Enhancing productivity and competitiveness
  • Building resilience to volatile global dynamics

Second Kartavya

  • Building people’s capacity
  • Making citizens strong partners in India’s path to prosperity

Third Kartavya

  • Ensuring every family, community, region and sector has access to resources, amenities and opportunities for meaningful participation

Sustaining the Momentum of Structural Reforms

Structural reforms are described as continuous, adaptive and forward-looking. The Budget underlines the role of:

  • A robust and resilient financial sector
  • Cutting-edge technologies, including AI applications, as force multipliers for better governance
  • Efficient allocation of capital, risk management and mobilisation of savings

India’s Reform Express

  • The government has undertaken comprehensive economic reforms aimed at job creation, productivity enhancement and growth acceleration
  • Over 350 reforms have been rolled out
  • These include GST simplification, notification of Labour Codes, and rationalisation of mandatory Quality Control Orders
  • High-Level Committees have been formed
  • The Central Government is working with State Governments on deregulation and reduction of compliance requirements

Pillars of Growth and Development

The Budget is structured around the following pillars:

  • Sustaining Economic Growth
  • Strengthening the Foundations of Growth
  • People-Centric Development
  • Trust-Based Governance
  • Ease of Doing Business and Ease of Living
  • Fiscal Matters

1. Sustaining Economic Growth 

1.1 Manufacturing: Strategic and Frontier Sectors Major Initiatives

  • Revival of 200 legacy industrial clusters
  • Biopharma SHAKTI
  • Electronics Components Manufacturing Scheme
  • Integrated Programme for Textiles
  • 3 Dedicated Chemical Parks
  • Container Manufacturing Scheme
  • India Semiconductor Mission (ISM) 2.0
  • Rare Earth Permanent Magnets scheme (research, mining, processing, manufacturing)
  • Hi-Tech Tool Rooms in CPSEs
  • Affordable Sports Goods Manufacturing Initiative

Tax Reforms to Boost Manufacturing

  • 5-year income tax exemption for non-residents supplying capital goods/tooling in bonded zones
  • Safe harbour for non-residents for component warehousing
  • Deferred duty payment window for trusted manufacturers
  • Duty-free import limit for seafood processing inputs raised from 1% to 3% of FOB value
  • Duty-free imports extended to shoe uppers
  • Export period extended from 6 months to 1 year for leather and textile exporters
  • Customs duty exemptions for – Microwave oven parts, Aircraft manufacturing components, Aircraft MRO raw materials for defence
  • One-time concessional duty sale in DTA for eligible SEZ units
  • Electronic sealing for export cargo from factory to port

MSMEs: Three-Pronged Growth Strategy 

Equity Support

  • ₹10,000 crore SME Growth Fund
  • ₹2,000 crore top-up to Self-Reliant India Fund

Liquidity Support via TReDS

  • Mandatory TReDS usage by CPSEs
  • CGTMSE credit guarantee for invoice discounting
  • Linking GeM with TReDS
  • TReDS receivables to be securitised

Professional Support

  • ‘Corporate Mitras’ in Tier-II and Tier-III towns
  • Tax Proposal: Removal of ₹10 lakh cap per consignment on courier exports.

1.2 Renewed Focus on Services Sector 

Health & Medical Tourism

  • Five Medical Value Tourism hubs with States & private sector
  • Education-to-Employment Standing Committee
  • New and upgraded Allied Health Professional institutions
  • Training 1.5 lakh multiskilled caregivers
  • 3 new All India Institutes of Ayurveda
  • Strengthening AYUSH labs and WHO Traditional Medicine Centre

Orange Economy, Sports & Design

  • AVGC Creator Labs in 15,000 schools & 500 colleges
  • New National Institute of Design in eastern India
  • Khelo India Mission with integrated talent pathways

Education & Tourism Push 

Education

  • 5 University Townships near industrial corridors
  • Girls’ hostels in STEM institutions in every district
  • Four telescope infrastructure facilities

Tourism

  • National Destination Digital Knowledge Grid
  • Eco-trails: Mountain, Turtle & Bird Watching
  • Global Big Cat Summit hosted by India
  • 15 archaeological sites developed
  • Upskilling 10,000 tourist guides
  • National Institute of Hospitality
  • Buddhist Circuit development in Northeast

Services Sector Tax Reforms

  • IT services under single category with 15.5% safe harbour
  • Safe harbour threshold raised from ₹300 crore to ₹2,000 crore
  • Automated APA approvals
  • Safe harbour extended up to 5 years
  • Fast-track APA completion within 2 years
  • Tax holiday till 2047 for foreign cloud companies via India data centres
  • 15% safe harbour for data centre entities
  • Global income exemption for non-resident experts (5 years)

Financial Sector Reforms

  • ₹100 crore incentive for municipal bond issuances above ₹1,000 crore
  • Restructuring of PFC and REC
  • FEMA Non-Debt Instruments review
  • Market-making framework for corporate bonds
  • Total Return Swaps introduction
  • High-Level Committee on Banking for Viksit Bharat

Tax Proposals

  • STT on Futures: 0.02% → 0.05%
  • STT on Options: 0.1–0.125% → 0.15%

Tax Proposals: Agriculture & Cooperatives

  • Duty-free fish catch in EEZ and High Seas
  • Foreign port landing treated as exports
  • Expanded deductions for cooperative societies
  • Dividend tax exemption for national cooperative federations (3 years)

1.3 Increasing Farmers’ Income 

Key Focus Areas

  • Fisheries value chain & 500 reservoirs
  • Coconut Promotion Scheme
  • Cashew & Cocoa Programmes
  • High-value horticulture & orchard rejuvenation
  • Veterinary & para-vet infrastructure via capital subsidy
  • Bharat-VISTAAR with AI-enabled AgriStack integration

2. Strengthening the Foundations of Growth 

Infrastructure Push

  • Infrastructure Risk Guarantee Fund
  • CPSE real estate monetisation via REITs
  • New Freight Corridor: Dankuni–Surat
  • 20 new National Waterways
  • Coastal Cargo Promotion: share to rise from 6% to 12% by 2047
  • Seaplane VGF Scheme
  • ₹2 lakh crore SASCI support to States
  • Purvodaya East Coast Industrial Corridor

Public Capex

  • ₹12.2 lakh crore in FY27 (up from ₹2 lakh crore in FY15)

Energy Security & Green Transition

  • ₹20,000 crore CCUS Scheme
  • Customs duty exemptions for: Lithium-ion battery capital goods, Solar glass raw materials, Nuclear power projects till 2035, Critical minerals processing
  • Full excise exemption on biogas portion in blended CNG

Urbanisation: City Economic Regions

  • Focus on Tier-II, Tier-III cities & temple towns
  • 7 High-Speed Rail Corridors: Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delhi-Varanasi and Varanasi-Siliguri

3. People-Centric Development

  • Care ecosystem for elderly
  • SHE Marts for women SHGs
  • Divyangjan Kaushal & Divyang Sahara Yojanas
  • Scaling ALIMCO with AI integration
  • NIMHANS-2 & upgraded mental health institutes
  • Trauma & emergency centres in district hospitals

4. Trust-Based Governance

  • Duty deferral doubled to 30 days for Tier II & III AEOs
  • Advance ruling validity extended to 5 years
  • Automated customs notifications
  • Warehouse operator-centric customs framework

5. Ease of Doing Business & Living 

Major Taxpayer-Friendly Measures

  • PROIs allowed PIS equity investments
  • Motor accident compensation interest tax-exempt
  • TCS on overseas tours cut to 2%
  • LRS TCS for education/medical reduced to 2%
  • Automated lower TDS certificates
  • Return revision deadline extended to 31 March
  • MAT exemptions for non-residents
  • Amnesty & disclosure schemes
  • Decriminalisation of procedural lapses
  • Customs Integrated System rollout in 2 years
  • Exempt BCD on 17 drugs or medicines for cancer patients

6. Fiscal Matters & Deficit Management 

Finance Commission

  • 41% vertical devolution retained
  • ₹1.4 lakh crore grants to States in FY27

Fiscal Deficit

  • FY26 RE: 4.4% of GDP
  • FY27 BE: 4.3% of GDP

Debt Targets

  • Debt-to-GDP: 55.6% in FY27
  • Target: 50±1% by 2030

Where the Rupee Comes From & Goes 

Revenue Sources

  • Income Tax: 21%
  • Corporation Tax: 18%
  • GST & other taxes: 15%

Expenditure Heads

  • States’ tax share: 22%
  • Interest payments: 20%
  • Defence: 11%
  • Central Sector Schemes: 17%

Major Sectoral Expenditure (₹ crore)

Transport: 5,98,520

Defence: 5,94,585

Rural Development: 2,73,108

Home Affairs: 2,55,234

Agriculture and Allied Activities: 1,62,671

Education: 1,39,289

Energy: 1,09,029

Health: 1,04,599

Urban Development: 85,522

IT and Telecom: 74,560

Commerce and Industry: 70,296

Social Welfare: 62,362

Scientific Departments: 55,756

Tax Administration: 45,500

External Affairs: 22,119

Finance: 20,649

Development of North East: 6,812

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