New Delhi: Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, 2026, in Parliament, marking her ninth consecutive budget presentation. Delivered in the newly inaugurated Kartavya Bhawan, the budget outlines a strategic roadmap centered on accelerating economic growth, fulfilling citizen aspirations, and ensuring inclusive development under the vision of Viksit Bharat (Developed India). With a total expenditure estimated at ₹53.5 lakh crore, the budget emphasizes manufacturing revival, infrastructure push, fiscal discipline, and targeted sectoral interventions to sustain momentum in a volatile global environment.
The budget adopts three core kartavyas (duties): accelerating and sustaining economic growth by enhancing productivity and resilience; fulfilling people’s aspirations through capacity building; and promoting Sabka Saath, Sabka Vikas to provide equitable access to resources and opportunities.
Fiscal Discipline and Macroeconomic Framework
The government maintains a firm commitment to fiscal consolidation. The fiscal deficit for Budget Estimate (BE) 2026-27 stands at 4.3% of GDP, down from 4.4% in BE 2025-26. The debt-to-GDP ratio is projected at 55.6% in BE 2026-27, compared to 56.1% in Revised Estimate (RE) 2025-26, with a medium-term target of 50 ± 1% by 2030.
Non-debt receipts are estimated at ₹36.5 lakh crore, while net tax receipts reach ₹28.7 lakh crore. Revenue receipts are budgeted at ₹35.3 lakh crore (up 5.7% from RE 2025-26), and capital receipts at ₹18.1 lakh crore (up 11.7%). Effective capital expenditure hits a record ₹17.1 lakh crore (up 22.1% from RE 2025-26), underscoring the infrastructure-led growth strategy.
Revenue sources include borrowings and liabilities (24%), income tax (21%), corporation tax (18%), GST and other taxes (15%), non-tax receipts (10%), union excise duties (6%), customs (4%), and non-debt capital receipts (2%). Expenditure allocation prioritizes states’ share of taxes and duties (22%), interest payments (20%), central sector schemes (17%), defence (11%), centrally sponsored schemes (8%), Finance Commission transfers (7%), other expenditure (7%), major subsidies (6%), and pensions (2%).
The government has accepted the 16th Finance Commission’s recommendations, retaining the vertical devolution share at 41% and providing ₹1.4 lakh crore in grants, including for rural/urban local bodies and disaster management.
Manufacturing as the Core Pillar
The budget positions manufacturing as the engine of growth, drawing lessons from global powers like the US and China. It scales up production in seven strategic and frontier sectors through targeted incentives, reduced import dependence, and enhanced export competitiveness.
Key initiatives include:
- Biopharma SHAKTI: A ₹10,000 crore outlay over five years to transform India into a global biopharma hub, focusing on biologics, biosimilars, over 1,000 accredited clinical trial sites, and strengthening CDSCO with a dedicated scientific cadre.
- India Semiconductor Mission (ISM) 2.0: Building on ISM 1.0, it expands to semiconductor equipment, materials, Indian IP development, and industry-led research/training ecosystems.
- Electronics Components Manufacturing Scheme: Outlay raised to ₹40,000 crore from ₹22,919 crore, capitalizing on strong investment momentum.
- Rare Earth Permanent Magnets Scheme: Operationalizing corridors in mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu for mining, processing, research, and downstream manufacturing.
- Chemical Parks: Three dedicated parks to lower entry barriers and strengthen supply chains for pharma, electronics, energy, and infrastructure.
- SME Growth Fund: ₹10,000 crore for equity support to high-potential MSMEs, plus ₹2,000 crore top-up (total ₹4,000 crore mentioned in some contexts) for the Self-Reliant India Fund.
Additional measures cover reviving 200 legacy industrial clusters, a Container Manufacturing Scheme (₹10,000 crore over five years), high-tech tool rooms by CPSEs, and integrated textile programs (National Fibre Scheme, Textile Expansion and Employment Scheme, National Handloom and Handicraft Programme, Text-ECON, SAMARTH 2.0).
Orange Economy and Creative Sectors
The budget introduces the orange economy (creative industries like music, films, art, design, and performances), highlighting its multiplier effects on tourism, hospitality, and retail. It supports the Indian Institute of Creative Technologies (IICT), Mumbai, to establish AVGC (Animation, Visual Effects, Gaming, Comics) Content Creator Labs in 15,000 secondary schools and 500 colleges, preparing for 2 million jobs by 2030 in skills like AR/VR, digital content, and immersive experiences.
Agriculture and Farmer Welfare
Agriculture employs nearly half the population despite its GDP share falling to around 18%. The budget promotes high-value crops to raise incomes without heavy MSP/subidy reliance. Highlights include the Coconut Promotion Scheme for replacing ageing trees with high-yielding varieties (with potential income support during transition), regional crops like sandalwood, cashew, agar, and cocoa self-reliance.
Bharat-VISTAAR, a multilingual AI tool integrating AgriStack and ICAR knowledge, offers customized farming advice.
Financial Sector and Tax Reforms
No changes to income-tax slabs were announced. Key shifts include:
- TDS on immovable property sales by non-residents uses buyer’s PAN instead of TAN, simplifying paperwork.
- STT hikes effective April 1, 2026: Options premium to 0.15% (from 0.10%), futures to 0.05% (from 0.02%), aiming to curb speculation.
- Share buybacks taxed as capital gains for all; promoters face additional tax (effective 22% for corporate, 30% for non-corporate), ending arbitrage.
- Sovereign Gold Bonds exempt from capital gains only if held to maturity by original investor.
- Interest from motor accident tribunals fully exempt from tax and TDS.
- Revised ITR flexibility for errors; tightened foreign asset disclosures.
Customs reforms include a single digital window (Customs Integrated System) within two years, duty-free fish catch by Indian vessels, exemptions on aircraft components, and increased limits for seafood input imports.
Items Getting Cheaper and Costlier
Customs duty reductions make several items cheaper: personal imported goods (tariff from 20% to 10%), 17 cancer drugs, rare disease medicines/FSMP, leather footwear/textiles, seafood processing inputs, overseas tour packages, lithium-ion cells, solar glass, critical minerals, biogas-blended CNG, microwave ovens, foreign education, and aircraft manufacturing parts.
Items getting costlier: alcohol, cigarettes, nuclear power components, minerals/iron ore/coal, misreported income tax, stock options/futures (via STT).
Potential relief on European wine/beer/spirits via India-EU trade deal tariff cuts.
Other Key Initiatives
- Carbon Capture, Utilization, and Storage (CCUS): ₹20,000 crore over five years for hard-to-abate sectors.
- Education to Employment: High-powered committee for services sector leadership (10% global share by 2047), AI job impact assessment.
- Health: 3 new AIIMS Ayurveda, 1 lakh allied health professionals, 1.5 lakh caregivers, NIMHANS-2, regional medical hubs.
- Education: University townships, new NID in east, girls’ hostels in STEM districts, telescope upgrades.
- Tourism: Five regional medical hubs with AYUSH, National Institute of Hospitality.
- Divyangjan: Kaushal Yojana training, Sahara Yojana for assistive devices.
- Sports: Khelo India Mission enhancements.
Over 350 reforms since Independence Day 2025 support manufacturing, MSMEs, infrastructure, and stability.
The Union Budget 2026-27 balances aggressive growth with prudence, prioritizing domestic strengths to navigate global volatility toward a self-reliant, inclusive economy.
FAQs
1. What is the fiscal deficit target for 2026-27, and how does it reflect the government’s approach to fiscal discipline?
The fiscal deficit for Budget Estimate (BE) 2026-27 is set at 4.3% of GDP, a slight improvement from the 4.4% in BE/Revised Estimate (RE) 2025-26. This continues the path of gradual consolidation, with the debt-to-GDP ratio projected to decline to 55.6% in BE 2026-27 (from 56.1% in RE 2025-26). The government aims for a medium-term debt-to-GDP target of 50 ± 1% by 2030. This balanced approach prioritizes sustained growth through higher capital expenditure while reducing borrowing dependence over time, freeing resources for priority sectors amid global volatility.
2. What are the major changes in personal income tax and related compliance in Budget 2026-27?
There are no changes to income tax slabs, rates, surcharge, or cess under either the old or new tax regime. Key reliefs and simplifications include:
Sovereign Gold Bonds remain exempt from capital gains tax only if held to maturity by the original investor. These measures focus on simplification, compliance ease, and long-term investing rather than rate cuts.
Easier TDS handling on immovable property sales by non-residents (using the buyer’s PAN instead of TAN, reducing paperwork).
Greater flexibility to revise and update income tax returns for correcting errors in capital gains, dividends, or foreign income reporting.
Tightened disclosure rules for foreign assets and overseas investments to promote transparency.
Full exemption from income tax and TDS on interest awarded by motor accident claim tribunals.
3. How does the Budget support manufacturing and key strategic sectors?
Manufacturing remains the central theme, with incentives scaled up in seven frontier sectors to reduce import dependence, boost exports, and create jobs. Major highlights include:
₹10,000 crore SME Growth Fund for equity support to high-potential MSMEs, plus top-up for the Self-Reliant India Fund. Additional schemes cover container manufacturing (₹10,000 crore over five years) and textiles (integrated programs like National Fibre Scheme and SAMARTH 2.0).
Biopharma SHAKTI — ₹10,000 crore over five years to build India as a global hub for biologics, biosimilars, clinical trials, and regulatory strengthening.
India Semiconductor Mission (ISM) 2.0 — Expanded scope to equipment, materials, IP, and skilled training.
Electronics Components Manufacturing Scheme — Outlay increased to ₹40,000 crore.
Rare Earth Corridors in states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.
Three dedicated Chemical Parks and revival of 200 legacy industrial clusters.
4. What are the key announcements related to the orange economy, agriculture, and emerging sectors?
The Budget introduces the orange economy (creative industries including AVGC-XR: animation, visual effects, gaming, comics, extended reality) to harness its multiplier effects on tourism, hospitality, and jobs. Support includes backing the Indian Institute of Creative Technologies (IICT), Mumbai, to set up AVGC Content Creator Labs in 15,000 secondary schools and 500 colleges, targeting 2 million skilled professionals by 2030.
In agriculture, emphasis is on high-value crops to raise farmer incomes: Coconut Promotion Scheme for replacing old trees, promotion of regional crops (sandalwood, cashew, agar, cocoa), and Bharat-VISTAAR (multilingual AI tool using AgriStack and ICAR data for customized advice).
Other emerging areas include ₹20,000 crore over five years for Carbon Capture, Utilization, and Storage (CCUS) in hard-to-abate sectors, and a high-powered committee for services sector growth (aiming 10% global share by 2047, assessing AI’s job impact).
5. Which items are expected to get cheaper or costlier due to customs duty and tax changes in Budget 2026-27?
Customs duty reductions and exemptions make several items cheaper, including: personal imported goods, 17 cancer drugs, medicines/food for rare diseases, leather footwear/textiles, seafood processing inputs, overseas tour packages, lithium-ion cells, solar glass, critical minerals, biogas-blended CNG, aircraft components, microwave ovens, and foreign education.
Items likely to get costlier include alcohol, cigarettes, nuclear power project components, minerals/iron ore/coal, and trading in stock options/futures (due to STT hikes: options premium to 0.15% from 0.10%, futures to 0.05% from 0.02%, effective April 1, 2026). Share buybacks are now taxed more evenly as capital gains, with additional tax on promoters to eliminate arbitrage.
Potential relief on European wines, beers, and spirits may come from the India-EU trade deal tariff cuts.
