Indina Union Budget 2026-27 — Key Highlights

Posted on by Exim Tutor | Consultant

Economic & Fiscal Framework

  • Fiscal deficit for FY 2026-27 projected at 4.3% of GDP, slightly lower than revised FY 26 estimate; focus on fiscal discipline.
  • Government aims to support growth while managing the deficit and debt trajectory.
  • India’s economy is expected to expand around 7–7.5%, driven by resilient consumption and investment.

Taxation Reforms

Direct Taxes

  • A new Income Tax Act, 2025 to come into effect from April 2026 with simplified rules and forms to ease compliance.
  • Rationalisation of penalty and prosecution processes; assessment and penalty to be integrated.
  • Proposal that buyback proceeds be taxed as capital gains for all shareholders; promoters to face additional levy.
  • No major changes to individual income tax slabs announced — continues existing structure.

Indirect Taxes & Customs

  • Customs duty on all dutiable goods imported for personal use reduced from 20% to 10%, easing costs for consumers.
  • Exemption of basic customs duty on 17 cancer drugs and additional medicines for rare diseases to improve affordability.
  • Customs duty changes aimed at lowering input costs for sectors like seafood, leather, electronics, aerospace and defence parts to help exports and manufacturing competitiveness.
  • Revision of baggage rules with enhanced duty-free allowances for international travellers.

Infrastructure, Industry & Growth Initiatives

  • Record capex of ₹12.2 lakh crore for FY 27, the highest ever and ~4.4% of GDP, to boost infrastructure and jobs.
  • Biopharma SHAKTI with ₹10,000 crore outlay over five years to develop India as a biopharma manufacturing hub.
  • Scheme to revive 200 legacy industrial clusters for competitiveness and technology upgrades.
  • Digital initiatives like a unified international trade platform (BharatTradeNet) and advanced customs IT systems to modernise trade facilitation.

Agriculture & Rural Economy

  • Total allocation of ₹1.63 lakh crore for agriculture, with emphasis on high-value crops, allied activities, and tech-enabled farming.

Social, MSME & Employment Measures

  • Support for Corporate Mitras — trained professionals to assist MSMEs with compliance and growth.
  • Establishment of Self-Help Entrepreneur (SHE) Marts to empower women-led rural enterprises.
  • Higher budgetary allocation for AYUSH sector including new Ayurvedic institutes and expanded research.
  • Proposal to exempt tax on interest received from motor accident compensation awards

Financial Markets & Investment

  • Securities Transaction Tax (STT) on futures and options hiked to discourage excess speculation.
  • Foreign investment reforms including portfolio investment access for NRIs in Indian shares.
  • Proposal to make Minimum Alternate Tax (MAT) a final levy at 14% for companies under the new tax regime.
  • FDI limit in insurance sector raised to 100% (conditions apply), opening the sector to more foreign capital.

Defence & Strategic Sectors

  • Increase in defence allocations and incentives to strengthen domestic defence manufacturing.

Other Notable Announcements

  • Simplification of TDS/TCS rules including extended deadlines and rationalised rates for overseas remittances and travel.
  • Long-term interest-free loans to states increased to support capital investments.
  • States’ share in central taxes retained at 41% for 2026-31 period.

Conclusion — A Budget Balancing Growth & Reform

The Union Budget 2026-27 is focused on supporting growth, boosting manufacturing and exports, rationalising tax and customs duties, and improving ease of living and doing business. While maintaining fiscal discipline, it introduces long-term structural reforms in direct and indirect taxation, infrastructure spending, and strategic sectors such as biotech, defence, and digital trade infrastructure.

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