Finance Minister Nirmala Sitharaman is presenting the Union Budget 2026-27 today in Parliament on 1 February 2026. This Budget is significant as it marks her ninth consecutive Budget presentation, making her one of the longest-serving finance ministers in India’s history.

The Budget focuses on sustaining economic growth, strengthening household finances, supporting businesses, and building long-term infrastructure, while maintaining fiscal discipline in a challenging global environment.

Let’s dive into the key highlights that will shape the financial landscape in the coming year.

1. Three Core “Kartavyas” (Duties)

The Budget is structured around three key duties that encapsulate the government’s vision:

Accelerate and sustain economic growth
Fulfil aspirations of citizens and strengthen households
Inclusive development across communities, regions and sectors

These pillars reflect the government’s intent to balance growth with social welfare and broad-based development.

2. Highest-Ever Capital Spending

One of the biggest highlights of Union Budget 2026 is the continued focus on infrastructure.

Capital expenditure has been raised to a record ₹12.2 lakh crore
Major allocations will go towards roads, railways, metro projects, ports, logistics, and urban infrastructure

This increased spending is aimed at boosting job creation, improving connectivity, and strengthening India’s long-term growth potential.

3. Strong Support for MSMEs

Recognising the role of MSMEs as the backbone of the economy, the Budget announced several measures:

A ₹10,000 crore SME Growth Fund to support expansion and innovation
₹2,000 crore liquidity support targeted at micro enterprises
Strengthening of the TReDS platform to ensure faster invoice payments

These initiatives aim to ease credit access, improve cash flows, and reduce financial stress for small businesses.

4. Focus on High-Potential Sectors

Biopharma

Launch of the Biopharma Shakti initiative
₹10,000 crore outlay over five years
Objective: Position India as a global hub for pharmaceutical manufacturing and innovation

Rare Earth & Critical Minerals

Finance Minister announced the creation of dedicated rare-earth corridors in Tamil Nadu, Kerala, Odisha, and Andhra Pradesh
These corridors will support mining, processing, research, and manufacturing of strategic and critical minerals
The initiative aims to reduce import dependence and strengthen India’s domestic rare-earth ecosystem

Textiles and Skill Development

Introduction of a National Fibre Scheme
New skilling and training initiatives to boost employment and improve global competitiveness in textiles

5. High-Speed Rail Corridors

The government has announced plans to develop seven new high-speed rail corridors to improve connectivity between major cities and strengthen links between Tier-2 and Tier-3 cities and large economic hubs.

The proposed corridors include:

Mumbai – Pune
Pune – Hyderabad
Hyderabad – Bengaluru
Hyderabad – Chennai
Chennai – Bengaluru
Bengaluru – Varanasi
Varanasi – Siliguri

These corridors aim to reduce travel time, improve regional connectivity, and support economic activity across states.

6. India Semiconductor Mission 2.0

The government will roll out India Semiconductor Mission 2.0
Focus on industry-driven research, advanced technology development, and training centres
Aim is to build strong semiconductor capabilities and a skilled workforce to support India’s electronics and manufacturing ambitions

7. Expansion of Ayurveda Institutions

The Finance Minister announced the establishment of three new All India Institutes for Ayurveda. This move aims to strengthen traditional medicine education, research, and healthcare delivery. It also supports India’s vision of promoting AYUSH systems globally.

8. Operationalising New National Waterways

The government will operationalise 20 additional national waterways over the next five years. The focus is on promoting eco-friendly, cost-effective, and efficient cargo transport. This initiative is expected to reduce logistics costs and support sustainable growth.

9. Dedicated Push for the Sports Goods Sector

A special initiative has been announced for the sports goods industry. Focus areas include:

Strengthening domestic manufacturing
Boosting exports
Supporting skill development

The goal is to position India as a global hub for sports equipment production.

10. Education & Skill Development

The Union Budget 2026 announced several measures to strengthen education, research, and skill development across the country:

The Centre will support states to set up five university townships near industrial corridors, helping align higher education with industry needs
One girls’ hostel will be established in every district to improve access to education for women
Four new telescope facilities will be set up to support research in astrophysics and astronomy
A new National Institute of Design (NID) will be established in the North-East
Support for setting up multiple universities and research institutions across states
A loan-linked subsidy support will be introduced for veterinary colleges
A pilot scheme to train 10,000 tourist guides across 20 major tourism destinations will be launched to boost tourism-linked employment

11. Agriculture & High-Value Crops

The Budget places a strong focus on improving farmer incomes through high-value crops:

The government will support cultivation of high-value crops such as coconut and cashew, especially in coastal regions
The aim is to make India self-reliant in production and trade of these crops
Measures will also be taken to support incomes of walnut, almond, and pine nut farmers
States will be supported in the cultivation of sandalwood, helping diversify farm income

12. Mahatma Gandhi Gram Swaraj Initiative

The Finance Minister announced the Mahatma Gandhi Gram Swaraj Initiative to boost the khadi, handloom, and handicraft sectors. The initiative will:

Connect these products to global markets
Provide branding and marketing support
Simplify training, skill development, and quality standards

13. Financial Markets & Institutional Reforms

To deepen capital markets and improve liquidity:

The government will restructure Power Finance Corporation (PFC) and Rural Electrification Corporation (REC)
A provision of ₹100 crore has been announced to support single bond issuances above ₹1,000 crore
A market-making framework for the corporate bond market will be set up to improve liquidity
Individual residents living outside India will be allowed to invest in Indian equities, expanding the investor base

14. Debt, Fiscal Deficit and Borrowing

The government has proposed to reduce the debt-to-GDP ratio to 55.6% in FY26–27, from 56.11% in FY25–26 (RE)
Lower debt levels are expected to free up resources by reducing interest outgo
Fiscal deficit is estimated at 4.4% for FY25–26 (RE) and projected to decline further to 4.3% in FY26–27
To finance the deficit, the government plans to borrow ₹11.7 lakh crore in FY26–27 through dated securities

15. Capex Push for FY27

The capital expenditure target has been raised to ₹12.2 lakh crore for FY27, up from ₹11.2 lakh crore in the current fiscal
Continued focus on infrastructure development in Tier-2 and Tier-3 cities
Proposal to set up a Risk Guarantee Fund for the infrastructure sector
A new scheme for construction and infrastructure equipment will be introduced to strengthen domestic manufacturing
Professional bodies like ICAI and ICSI will be supported to design short-term modular courses aligned with industry needs

16. Sports, Culture & Tourism

Launch of the Khelo India Mission for the sports sector over the next 10 years
15 archaeological sites will be developed into cultural destinations to promote tourism and heritage conservation
A credit-linked subsidy programme for animal husbandry will be introduced to support rural livelihoods

17. Urban & Regional Development

The government has earmarked ₹5,000 crore over five years for the development of City Economic Regions (CERs). These regions aim to promote planned urbanisation, economic clustering, and job creation.

18. Tariff Rationalisation

In response to global trade tensions, including tariff actions by the US, the Finance Minister announced a major cut in import duties:

Tariff on all dutiable goods imported for personal use reduced from 20% to 10%, making imports more affordable for individuals
Customs duty exemption on raw materials imported for MRO (Maintenance, Repair and Overhaul) services
Customs duty exemption on 17 cancer-related drugs, improving affordability of critical medicines
Basic Customs Duty exemption for specified parts used in the manufacture of microwave ovens

19. Relief on Foreign Travel, Education & Medical Expenses

TCS on overseas tour packages reduced to a flat 2%, from earlier rates of 5% and 20%
The minimum threshold for TCS has been removed, lowering upfront tax on foreign travel
Under the Liberalised Remittance Scheme (LRS), TCS for education and medical treatment abroad reduced from 5% to 2%
Manpower services will now be treated as contractor payments, attracting a lower TDS of 1% or 2%, reducing ambiguity for businesses

20. Income Tax Return (ITR) Filing Reforms

Deadline to revise income tax returns extended from December 31 to March 31, with a nominal fee
Staggered ITR filing timelines introduced: ITR-1 and ITR-2 (individuals) - up to July 31 and Non-audit businesses and trusts - up to August 31
Taxpayers will not be required to pay interest on penalty amounts while their case is under appeal before the first appellate authority

21. IT Sector Announcements

Software development, IT-enabled services, KPO, and contract R&D will now be grouped under a single category called Information Technology Services
A uniform safe harbour margin of 15.5% will apply across all IT services
The safe harbour threshold has been raised from ₹300 crore to ₹2,000 crore, benefiting more companies
Approvals will shift to an automated, rule-based system, removing manual scrutiny by tax officers and easing compliance

22. Changes in Buybacks and STT

Share buybacks will now be taxed as capital gains for all categories of shareholders
Securities Transaction Tax (STT) on futures increased to 0.05% from 0.02%

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