The Union Budget 2026–27, presented on 1 February 2026 by the Ministry of Finance, clearly signals the government’s intent to accelerate economic growth through infrastructure spending, strengthen domestic manufacturing under Atmanirbhar Bharat, and simplify tax compliance without burdening individuals with higher income tax rates.
With a total budget size of ₹53.5 lakh crore and a record capital expenditure of ₹12.2 lakh crore, this year’s budget balances fiscal discipline with long-term growth priorities. While there are no changes in personal income tax slabs, the government has introduced several reforms in tax administration, capital markets, customs duties, and sector-specific investments that will directly impact businesses, investors, farmers, and consumers.
Below is a detailed, easy-to-understand breakdown of the key announcements, economic indicators, and what they mean for India’s economy in the coming financial year.
A Growth-Focused Budget with Fiscal Discipline
One of the most important takeaways from the Union Budget 2026–27 is its continued focus on maintaining fiscal stability while supporting growth.
The fiscal deficit for FY 2026-27 has been pegged at 4.3% of GDP, slightly lower than the previous year’s 4.4%. This gradual reduction shows the government’s commitment to bringing public finances back on track after years of pandemic-led spending.
Public capital expenditure has been increased by 11.4% to ₹12.2 lakh crore, which accounts for around 4.4% of GDP. This makes it the highest-ever capex allocation and highlights infrastructure as the main engine of economic expansion.
The government has also outlined a clear debt roadmap. The debt-to-GDP ratio is targeted at 55.6% in Budget Estimates for 2026-27, with a long-term goal of reaching 50% (±1%) by 2030. This signals predictability and reassurance to global investors and credit rating agencies.
No Change in Income Tax Slabs, But Big Relief in Compliance
For salaried individuals and middle-class taxpayers, the biggest headline is that personal income tax slabs remain unchanged. The slab structure revised in 2025 will continue, meaning no additional tax burden on individual incomes.
However, the budget introduces several compliance-friendly measures that reduce stress and litigation for taxpayers.
New Income Tax Act from April 2026
On April 1st, 2026, the New Income Tax Act of 2025 will take effect. The objective is to simplify language, reduce ambiguity, and make tax laws easier to understand for ordinary citizens. While tax rates remain the same, procedures and definitions are expected to be clearer and more transparent.
Extended Deadline for Revised Returns
Taxpayers who make genuine mistakes will now get more time to correct them. The deadline for filing revised Income Tax Returns (ITRs) has been extended from 31 December to 31 March, subject to a nominal fee. This move is expected to reduce penalties and encourage voluntary compliance.
Major Changes in Capital Market Taxation
The budget has introduced some important changes that will impact investors and traders, especially those active in derivatives markets.
Higher STT on Derivatives
To address excessive speculative activity, the government has increased the Securities Transaction Tax (STT):
Futures: raised from 0.02% to 0.05%
Options: raised from 0.1% to 0.15%
This will increase transaction costs for high-frequency traders and derivatives participants, while long-term investors in equities remain largely unaffected.
Buyback Tax Shifted to Capital Gains
Earlier, companies paid tax on share buybacks, and shareholders received proceeds tax-free. Now, buyback proceeds will be taxed as Capital Gains in the hands of shareholders. This change aligns buybacks with other forms of equity income and brings more consistency to the tax system.
Relief and Transparency for Small Taxpayers
Several targeted measures in the budget aim to reduce hardship for small and genuine taxpayers.
One-Time Amnesty for Foreign Asset Disclosure
A six-month amnesty window has been announced for small taxpayers to disclose undisclosed foreign assets worth up to ₹1 crore. Those who come forward during this period will get immunity from prosecution, encouraging voluntary disclosure and compliance.
MACT Interest Fully Tax-Exempt
Income tax will no longer apply to interest granted by the Motor Accident Claims Tribunal (MACT). This provides much-needed relief to accident victims and their families, ensuring compensation is not eroded by taxation.
Customs Duty Cuts to Benefit Consumers and Industry
On the indirect tax front, the government has announced selective customs duty reductions aimed at lowering costs and boosting domestic manufacturing.
Cheaper Life-Saving Medicines
17 cancer drugs and medicines for 7 rare diseases have been fully exempted from customs duty. This move will significantly reduce treatment costs and improve access to critical healthcare.
Lower Duty on Personal Imports
The reduction of the personal import tariff from 20% to 10% is advantageous to those who buy products for their own use from overseas.
Boost to Manufacturing and Clean Energy
Customs duty exemptions have been extended to:
- Components used in mobile phone manufacturing
- Inputs required for solar glass production
- These measures support India’s electronics and renewable energy supply chains.
- TCS Rationalisation Brings Relief to Travellers and Students
The rationalisation of Tax Collected at Source (TCS) under the Liberalised Remittance Scheme (LRS) is another consumer-friendly step.
TCS on overseas tour packages has been reduced to a flat 2%, down from the earlier range of 5% to 20%.
TCS on remittances for education and medical purposes has also been brought down to 2%.
This will ease cash flow pressures for families sending money abroad for genuine needs.
Massive Infrastructure Push to Drive Jobs and Growth
Infrastructure remains the backbone of the 2026–27 budget strategy.
High-Speed Rail and Waterways
The government announced seven new High-Speed Rail corridors, including key routes like Mumbai-Pune and Delhi-Varanasi. These projects aim to reduce travel time, boost regional connectivity, and create large-scale employment.
In addition, 20 new National Waterways will be developed to promote cost-effective and eco-friendly logistics.
