Budget 2026: What Gets Cheaper, What Gets Expensive?

01 February 2026

4 min read

The Union Budget 2026 was presented by Finance Minister Nirmala Sitharaman on 1 February. It is her ninth consecutive budget and the third full budget under the leadership of Prime Minister Narendra Modi.

With the fiscal deficit set at 4.3% of GDP for FY27, Budget 2026 focuses on long-term economic and infrastructure growth, while offering targeted support to sectors such as travel and tourism, agriculture, textiles, logistics, education, sports, and MSMEs. A key highlight is the confirmation of the new Income Tax Bill, aimed at simplifying tax compliance for individuals and institutions.

Big Tax Changes You Should Know

1. Simpler Income Tax Rules

New Income Tax Act to come into effect from 1 April 2026, aimed at easier compliance.
Revised returns deadline extended to 31 March (earlier 31 December).
ITR deadlines unchanged for salaried taxpayers:

ITR-1 & ITR-2 due by 31 July
Non-audit business cases & trusts: 31 August

2. Lower TCS on Foreign Spending

Medical & education remittances (LRS): TCS cut from 5% to 2%
Overseas tour packages: TCS reduced to 2% (earlier 5% or 20%)

3. Relief for Small Taxpayers

Eligible taxpayers can now claim nil or rule-based deductions without applying for a lower withholding certificate.
Interest from MACT awards is now tax-exempt for individuals.

Customs Duty Adjustments: What Gets Cheaper?

Several customs duties changes have been introduced in the Union Budget. Items that are now cheaper include:

Medicines: 17 life-saving drugs, especially those for treating cancer and diabetes, will become more affordable owing to relief on customs duty.
Mobile Phones: Prices may come down with the Government offering relief on capital goods and components used in manufacturing.
EV Batteries: BCD on lithium-ion cells is exempted to drive a transition to green energy.
Leather & Textiles: Raw materials like specified textile inputs and Wet Blue leather will witness duty cuts, making finished apparel and leather goods more affordable.
Marine Products: Duty-free import limits for seafood processing inputs (such as shrimp feed) have been tripled from 1% to 3% of the FOB value.
Sports Equipment: The Finance Minister has noted that sports goods will be more affordable to encourage more participation of young athletes.
Other Goods- Solar panels, aircraft parts, and microwave ovens are set to get cheaper due to customs duty adjustments.

Customs Duty Adjustments: What Gets Costlier?

Some goods may become costlier across sectors. These include:

Items with negligible imports- Exemptions have been removed for goods where there is now domestic production is sufficient or where import volumes are still lower to justify tax breaks.
Particular Industrial Goods- Certain customs tariff rates for industrial goods will be adjusted to simplify the structure. It may lead to price hikes for specific parts and machinery.
Tobacco Products- Pan masala, cigarettes, and other tobacco products will become costlier due to a hike in health cess and excise duty.
Other Goods- Imported alcohol and luxury watches may get costlier due to customs duty adjustments

Other Notable Changes

ISM 2.0- This scheme has been launched to manufacture materials and equipment, along with design full stack, Indian IP, and boost supply chains.
Biopharma Shakti: With an aim to develop the country as a leading global biopharma manufacturing hub, the Biopharma Shakti initiative has been proposed, with a total outlay of ₹10,000 crores in the coming five years to build the entire ecosystem.
TCS rates for medical and education purposes under the LRS (Liberalized Remittance Scheme) has come down to 2% from 5%.
The TCS rate on overseas tours and packages has also come down from 5% or 20% to 2%.
Smaller taxpayers may now avail nil tax or rule-based deduction without filing their application for a lower withholding certificate.
Higher public capital expenditure- Public capital expenditure has been proposed to increase to ₹12.2 lakh crores in FY2026-27 from ₹11.2 lakh crore in BE2025-26.
Infrastructure risk guarantee fund- To boost private developer confidence on risks during developing infrastructure and during phases of construction, an infrastructure risk guarantee fund has been proposed. It will enable prudentially calibrated public credit guarantee for lenders.
SME Growth Fund- A ₹10,000 crore SME Growth Fund has been proposed for backing job-creating future enterprises.
Self-Reliant India Fund- There will be a top-up of ₹2,000 crore for micro-enterprise risk capital.
There is an outlay of ₹40,000 crore for the Electronics Components Manufacturing Scheme.

Economic Outlook

The Economic Survey 2025-26 projects 6.8-7.2% growth for FY27, while revising the medium-term potential growth rate upwards to 7.0% from 6.5%. This will be driven by sustained public investment, domestic reforms, and expansion of infrastructure. With a real GDP growth rate of 7.4% in FY26 (First Advance Estimates), India is still the quickest-growing leading economy for the fourth consecutive year. As a response to easing inflation, the RBI has already reduced the repo rate by 125 basis points from February, 2025, while the Government has accomplished a 4.8% fiscal deficit in FY25, while targeting 4.4% for FY26.

Disclaimer: This content is solely for educational purposes.

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