Budget 2026: Full Summary of Major Proposals and Reforms

The Union Budget for the Financial Year 2026-27 was presented by Finance Minister Nirmala Sitharaman in Parliament on February 1, 2026. The Finance Minister described the Budget as Yuva Shakti-driven and rooted in the government’s Sankalp to focus on the poor, the underprivileged, and the disadvantaged.

Economic Growth and Public Investment

The Budget places growth at the centre of policy. Public capital expenditure rises from Rs. 11.2 lakh crore in Budget Estimates 2025-26 to Rs. 12.2 lakh crore in FY 2026-27. The government views public investment as a key driver of demand, job creation, and private investment.

Manufacturing receives focused support. The Budget proposes scaling up production across seven strategic and frontier sectors. These sectors include biopharma, semiconductors, capital goods, textiles, chemicals, and critical minerals. The aim is to raise productivity, strengthen supply chains, and reduce import dependence.

A major announcement is Biopharma SHAKTI with an outlay of Rs. 10,000 crore over five years. The programme seeks to build an ecosystem for domestic production of biologics and biosimilars. It includes the setting up of three new National Institutes of Pharmaceutical Education and Research and the upgradation of seven existing ones. It also proposes a large network of accredited clinical trial sites and a stronger drug regulator.

MSMEs and Industrial Support

Micro, Small and Medium Enterprises remain central to the growth agenda. The Budget proposes a Rs. 10,000 crore SME Growth Fund to help create future champion enterprises. The fund will support firms that show scale, innovation, and export potential.

Legacy industrial clusters will be rejuvenated through infrastructure and technology upgrades. The textile sector will receive an integrated programme that covers natural fibres, man-made fibres, traditional clusters, handlooms, handicrafts, and skill development. The objective is to raise employment and competitiveness in a labour-intensive sector.

The IT sector receives a structural reform. Software development, IT-enabled services, knowledge process outsourcing, and contract research services are grouped under a single category of Information Technology Services. A common safe harbour margin of 15.5% applies. The threshold for availing safe harbour rises from Rs. 300 crore to Rs. 2,000 crore. This change seeks to reduce disputes and provide certainty.

Foreign companies that provide cloud services using data centres in India will receive a tax holiday until 2047. This measure aims to attract global digital infrastructure and long-term investment.

Direct Tax Reforms

A key reform is the implementation of the New Income Tax Act, 2025 from April 2026. The government will notify simplified income tax rules and redesigned forms. The stated objective is easier compliance for ordinary taxpayers.

The Budget focuses on reducing litigation. Assessment and penalty proceedings will be integrated into a single process. The required pre-deposit for filing appeals will reduce from 20% to 10% of core tax demand.

Taxpayers will be allowed to file updated returns even after reassessment proceedings begin. This option requires payment of an additional 10% tax over the applicable rate. No penalty will apply on the additional income declared through such returns.

The Budget grants immunity from prosecution for non-disclosure of non-immovable foreign assets with an aggregate value below Rs. 20 lakh. This relief applies with retrospective effect from October 1, 2024.

Tax Collected at Source rates see rationalisation. The rate on overseas tour packages reduces to 2%. The rate on remittances for education and medical purposes under the Liberalised Remittance Scheme also reduces to 2%. Timelines for revising returns extend until March 31 with payment of a nominal fee. Income tax return due dates are codified in law based on taxpayer category.

Indirect Taxes and Customs

Indirect tax proposals focus on domestic manufacturing, exports, and ease of living. The Budget extends basic customs duty exemption on capital goods used for manufacturing lithium-ion cells. It exempts duty on capital goods required for processing critical minerals. It also provides duty relief for aircraft manufacturing and extends exemptions for nuclear power projects.

The tariff rate on all dutiable goods imported for personal use reduces from 20% to 10%. Basic customs duty is removed on 17 drugs and medicines. Additional rare diseases are added for duty-free personal imports of treatment items.

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Customs processes will move towards speed and transparency. The warehousing framework will shift to a warehouse operator-centric model with self-declaration, electronic tracking, and risk-based audit. Advance rulings under customs will remain valid for five years. Duty deferral periods for certain authorised operators will extend to 30 days.

Cargo clearances from multiple government agencies will move to a single digital window by the end of the financial year. Non-intrusive container scanning using advanced imaging and AI will expand across major ports.

The Budget removes the Rs. 10 lakh value cap on courier exports. Fish caught by Indian vessels in the Exclusive Economic Zone or on the high seas will be duty-free. Landing of such fish at foreign ports will be treated as export.

Infrastructure, Transport, and Cities

Infrastructure remains a core pillar. The Budget proposes new dedicated freight corridors and the operationalisation of 20 national waterways over five years. These measures aim to lower logistics costs and support sustainable transport.

Seven high-speed rail corridors will connect major cities as growth connectors. City Economic Regions will be mapped based on growth drivers. Each region will receive Rs. 5,000 crore over five years through a challenge-based funding model.

Human Capital and Social Sectors

The second Kartavya focuses on capacity building. The Budget proposes five regional medical tourism hubs in partnership with states and the private sector. These hubs will combine treatment, education, and research.

Veterinary education and infrastructure will receive support through loan-linked capital subsidies. AVGC content creator labs will be set up in schools and colleges. One girls’ hostel will be established in every district for higher education STEM institutions.

A National Institute of Hospitality will be created by upgrading an existing institution. A Khelo India Mission will guide sports development over the next decade.

Fiscal Discipline

The government reaffirms fiscal discipline. The fiscal deficit for FY 2026-27 stands at 4.3% of GDP. The debt-to-GDP ratio is estimated at 55.6%. Net market borrowings are set at Rs. 11.7 lakh crore.

Conclusion

The Budget places youth, manufacturing, infrastructure, and compliance reform at the centre of India’s development path as the country moves towards Viksit Bharat. 

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