Union Budget 2026: Key Announcements, Policy Updates & Market Impact

All eyes were on Parliament as the Union Budget 2026 was presented on Sunday, 01 February, a rare first in India’s budgetary history. Presented by the Smt Nirmala Sitharaman (Finance Minister), the budget is anchored in the vision of the “तीन कर्तव्य”: 

• accelerating economic growth 
• fulfilling people’s aspirations through capacity building 
• ensuring “Sabka Saath, Sabka Vikas”

This blog highlights key points of the Union Budget 2026, explaining what was announced and how it aligns with India’s journey towards a “Viksit Bharat”.

Key Highlights of Union Budget 2026

• GDP growth for FY25 stood at 6.5%, with GVA growth at 6.4%.
• GDP growth for FY26 (FAE) is estimated at 7.4%, while GVA growth is projected at 7.3%, both revised upward.
• The fiscal deficit is projected at 4.3% of GDP for BE 2026–27, indicating continued fiscal consolidation.
• The debt-to-GDP ratio is expected to ease to 55.6% in BE 2026–27.
• Total government expenditure for 2026–27 is estimated at ₹53.5 lakh crore.
• Focus on high-value agriculture, animal husbandry, and farmer income enhancement.
• Major push for infrastructure and connectivity, including high-speed rail corridors and inland waterways.
• Emphasis on education, skill development, and employment, with AI-led training initiatives.
• Key tax changes include updates to income tax, STT, buyback taxation, and TCS rates.

Key Focus Areas of Budget 2026-27

Here are the key budget highlights for 2026-27 you should know:

Taxation and Compliance

1. Direct Tax Measures

• The Income Tax Act, 2025, will take effect on 1 April 2026, with the aim of simplifying tax language and structure.
• Personal income tax slabs remain unchanged, ensuring continuity and predictability for taxpayers.
• The time limit to revise Income Tax Returns (ITR) has been extended up to 31 March of the relevant assessment year.
• Interest on motor accident compensation awards is now fully tax-exempt.

2. TDS and TCS Changes

• TCS on overseas education and medical remittances under the Liberalised Remittance Scheme (LRS) has been reduced from 5% to 2%.
• For the sale of immovable property by NRIs, TDS will now be deducted by the resident buyer, removing the earlier requirement for obtaining a TAN.

3. Capital Markets and Corporate Taxation

• Buyback proceeds will now be taxed as capital gains in the hands of shareholders, instead of being taxed at the company level.
• An additional buyback tax will apply to promoters:
  • 22% for corporate promoters
  • 30% for non-corporate promoters
    
• Securities Transaction Tax (STT) on commodity futures has been increased from 0.02% to 0.05%.
• STT on options premium and option exercise has also been increased.

4. Corporate Tax and Compliance

• The Minimum Alternate Tax (MAT) will now be treated as final tax, with the rate reduced from 15% to 14%.
• The safe harbour threshold for IT services has been increased from ₹300 crore to ₹2,000 crore, reducing transfer pricing disputes.
• A tax holiday till 2047 has been announced for foreign companies offering cloud services by setting up data centres in India.

5. Customs Duties and Trade

• Customs duty exemptions have been extended for goods used in lithium-ion cell manufacturing and critical minerals.
• The import exemption for nuclear power projects has been extended until 2035.
• Customs duties have been reduced or exempted on select aircraft parts, EV components, solar inputs, and critical medicines.

Read More About: India-EU Trade Agreement

Banking and Financial Sector

The Union Budget 2026–27 introduces measures to strengthen banks, deepen capital markets, and improve access to finance.

• A high-level committee will review the banking sector to support future growth and enhance customer safety.
• Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will be restructured to strengthen financing for the power sector.
• A market-making framework will be introduced to improve liquidity in the corporate bond market.
• Cities issuing municipal bonds above ₹1,000 crore will receive an incentive of ₹100 crore per issuance.
• Investment limits for Persons Resident Outside India (PROI) have been increased, with the overall cap raised to 24% and per-stock limits to 10%.

Manufacturing and Industry

• Seven strategic and frontier manufacturing sectors have been identified under Make in India.
• Semiconductor Mission 2.0 has received an enhanced outlay of ₹40,000 crore.
• A ₹10,000 crore SME Growth Fund has been announced to support high-potential MSMEs.
• BioPharma SHAKTI, with an outlay of ₹10,000 crore, has been launched to strengthen biologics manufacturing.

Capital Expenditure 

• Public capital expenditure has been increased to ₹12.2 lakh crore for FY 2026–27.
• This allocation reinforces the government’s emphasis on infrastructure-led economic growth.
• The higher capex is aimed at crowding in private investment and improving asset creation.

Railways and High-Speed Connectivity

• Seven high-speed rail corridors have been announced as growth connectors.
• These corridors will link major economic and urban centres across regions.
• The objective is to improve mobility, reduce travel time, and support regional development.

Inland Waterways and Coastal Shipping

• The government plans to operationalise 20 National Waterways over the next five years.
• A Coastal Cargo Promotion Scheme has been announced to shift freight from road and rail to waterways.
• The long-term goal is to increase the share of cargo moved by inland waterways and coastal shipping.

Industrial Corridors and Regional Nodes

• The East Coast Industrial Corridor will be developed to boost industrial activity.
• A well-connected industrial node will be established in Durgapur.
• This corridor aims to strengthen logistics, manufacturing, and regional employment.

Urban Infrastructure and Mobility

• City Economic Regions (CERs) will be developed as city-led growth hubs.
• Each CER will receive ₹5,000 crore over five years to support planned urban development.
• 4,000 electric buses will be deployed to promote clean and sustainable urban transport.

Infrastructure Financing Support

• A new Infrastructure Risk Guarantee Fund has been announced.
• The fund is aimed at reducing project risk and encouraging private sector participation in infrastructure projects.

Agriculture and Rural Economy

• The budget focuses on increasing farmer incomes through productivity enhancement.
• High-value crops such as coconut, cocoa, cashew, and sandalwood will be promoted in coastal regions.
• Agarwood in the North-East and nut crops in hilly regions will receive targeted support.
• A Coconut Promotion Scheme has been introduced to improve competitiveness and production.
• Bharat Vistar, a multilingual AI platform, will provide farmers with integrated digital advisory support.

Animal Husbandry and Allied Activities

• Entrepreneurship in animal husbandry will be supported through credit-linked subsidy programmes.
• Livestock enterprises will be scaled up and modernised.
• Dairy, poultry, and livestock value chains will be strengthened.
• Livestock pharmaceutical producer organisations will be encouraged.

Education, Skills, and Employment

• Education, employment, and enterprise have been identified as core drivers of Viksit Bharat.
• The budget targets a 10% global share in the services sector by 2047.
• AI will be integrated into skill development programmes.
• Five university townships will be developed as planned academic zones.
• ABGC content creator labs will be set up in 15,000 schools and 500 colleges.
• A National Institute of Design will be established in eastern India.

Healthcare, Wellness, and AYUSH

• The government plans to add 1 lakh Allied Health Professionals over five years.
• Access to mental health and trauma care will be expanded.
• Medical tourism will be promoted with private sector participation.
• An All-India Institute of Ayurveda will be established.
• AYUSH pharmacies and testing labs will be upgraded.
• The WHO Collaborating Centre for Traditional Medicine in Jamnagar will be strengthened.

Tourism, Culture, and Sports

• The National Council for Hotel Management will be upgraded to a National Institute of Hospitality.
• 10,000 tourist guides will be trained across 20 iconic destinations.
• A National Destination Digital Knowledge Grid will document cultural and heritage sites.
• The Khelo India Mission will strengthen talent development, coaching, and sports infrastructure.

Key Economic Data and Estimates

India’s GDP growth stood at 6.5% in FY25, reflecting sustained economic momentum. Gross Value Added (GVA) at basic prices grew by 6.4% in FY25, indicating broad-based activity across sectors.

As per the First Advance Estimates (FAE) for FY26,

• GDP growth is projected at 7.4%
• GVA growth is estimated at 7.3%

Sector-wise Contribution to Nominal GDP

Sector	FY25 (%)	FY26 (%) – FAE
Agriculture, Livestock, Forestry & Fishing	16.3	15.2
Core Industries	24.6	24.3
Services	49.9	51.1

Industry-wise Contribution to Nominal GDP

Core Industry	FY25 (%)	FY26 (%) – FAE
Mining & Quarrying	1.6	1.4
Manufacturing	12.6	12.8
Electricity, Gas, Water & Other Utilities	2.4	2.3
Construction	7.9	7.8

Service-wise Contribution to Nominal GDP

Services Sub-sector	FY25 (%)	FY26 (%) – FAE
Trade, Hotels, Transport, Communication & Broadcasting	15.9	15.8
Financial, Real Estate & Professional Services	20.8	21.4
Public Administration, Defence & Other Services	13.2	13.8

Tax Collection 

Revenue collections show consistent growth, supporting fiscal stability.

• Personal income tax collections grew by 6.8% year-on-year up to November 2025.
• Corporate tax collections increased by 7.8% year-on-year during the same period.
• GST collections between April and December 2025 reached an all-time high of ₹17.4 lakh crore, registering 6.7% year-on-year growth.

Conclusion

With sustained emphasis on infrastructure, targeted sectoral support, financial system strengthening, and measured tax reforms, the Union budget 2026 sets the direction for the year ahead while keeping long-term national goals in sight. Together, these measures reinforce India’s path towards a Viksit Bharat amid evolving global and domestic conditions.

Source: https://economictimes.indiatimes.com/

Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.