On the sacred occasion of Magha Purnima and the birth anniversary of Guru Ravidas, Finance Minister Nirmala Sitharaman presented the Budget for the year 2026-2027. This was her 9th consecutive budget. This is a Yuva Shakti-driven Budget.
| Table of Content |
| Budget Basics MACRO-ECONOMIC HIGHLIGHTS OF THE BUDGET 2026-27 Budget Highlights 2026-27-Part A India’s Reforms Express Budget Tax Proposals- Part B |
Budget Basics:
- Budget: Budget is essentially a statement of anticipated receipts and expenditure. The annual budget covers all aspects of government finances, including revenue generation, expenditure allocations, and policy announcements.
- Government Receipts: The Government receipts are categorised into revenue and capital receipts.
- Government Receipts for 2026-27:
- Government Expenditure: The expenditure of the Government is also categorized into revenue and capital expenditure. The components of the expenditure are also shown below.
- Government expenditure for 2026-27:
MACRO-ECONOMIC HIGHLIGHTS OF THE BUDGET 2026-27:
- Total Receipts for FY 2026-27: The total receipts for FY 2026-27 is estimated at Rs. 53.4 lakh crore.
- Total Expenditure for FY 2026-27: The total expenditure in Budget Estimates (BE) 2026-27 is estimated at ₹53,47,315 crore of which total capital expenditure is ₹12,21,821 crore and effective capital expenditure is ₹17,14,523 crore.
- Fiscal Deficit: The fiscal deficit is estimated at 4.3 per cent of GDP.
- The Government has accepted the recommendation of the 16th Finance Commission to retain the vertical share of devolution at 41%. ₹1.4 lakh crore has been provided to the States for the FY 2026-27 as Finance Commission Grants, which include Rural and Urban Local Body and Disaster Management Grants.
- The debt-to-GDP ratio is estimated to be 55.6 percent of GDP in BE 2026-27, compared to 56.1 percent of GDP in RE 2025-26.
Budget Highlights 2026-27-Part A:
- India’s economic trajectory has been marked by stability, fiscal discipline, sustained growth and moderate inflation.
- India will continue to take confident steps towards Viksit Bharat, balancing ambition with inclusion. India will prefer action over ambivalence, reform over rhetoric and people over populism.
- Steps taken by the Government to achieve 7% High Growth Rate:
- Government’s Sankalp: The budget reiterates Government’s ‘Sankalp’ of its focus on poor, underprivileged and the disadvantaged. The Budget 2026-27 is inspired by 3 kartavya:
- First Kartavya: Accelerate and sustain economic growth, by enhancing productivity and competitiveness, and building resilience to volatile global dynamics.
- Second kartavya: To fulfil aspirations of our people and build their capacity, making them strong partners in India’s path to prosperity.
- Third kartavya: To ensure that every family, community, region and sector has access to resources, amenities and opportunities for meaningful participation.
- Ecosystem required for the achievement of the Sankalp: This threefold approach requires a supportive ecosystem– Sustaining the momentum of structural reforms, robust and resilient financial sector, and cutting-edge technologies, including AI applications.
India’s Reforms Express:
The Government has undertaken comprehensive economic reforms towards creating employment, boosting productivity and accelerating growth. Over 350 reforms have been rolled out. These include GST simplification, notification of Labour Codes, and rationalisation of mandatory Quality Control Orders.
| First kartavya: Accelerate and sustain economic growth | Kartavya-1: Area-1 Scaling up manufacturing in 7 strategic and frontier sectors:
Kartavya-1- Area-2 Rejuvenation of Legacy Industrial Clusters: Scheme to revive 200 legacy industrial clusters to improve their cost competitiveness and efficiency through infrastructure and technology upgradation. Kartavya-1- Area-3 Creating “Champion SMEs” and supporting micro enterprises Three-pronged approach to help the MSME’s grow as “champions”. Kartavya-1- Area-4 Delivering a powerful push to Infrastructure:
Kartavya-1- Area-5 Ensuring long-term energy security and stability: An outlay of ₹20,000 crore over the next 5 years, is proposed for CCUS technologies at scale to achieve higher readiness levels in end-use applications across five industrial sectors, including, power, steel, cement, refineries and chemicals. Kartavya-1- Area-6 Developing City Economic Regions: Amplify the potential of cities to deliver the economic power of agglomerations by mapping city economic regions (CER), based on their specific growth drivers. An allocation of ₹ 5000 crore per CER over 5 years is proposed for implementing their plans. Develop seven High-Speed Rail corridors between cities as ‘growth connectors’, namely i) Mumbai-Pune, ii) Pune-Hyderabad, iii) Hyderabad-Bengaluru, iv) Hyderabad-Chennai, v) Chennai-Bengaluru, vi) Delhi-Varanasi, vii) Varanasi-Siliguri. | ||||||||||||||||||||
| Second kartavya: To fulfil aspirations and build capacity | Second Kartavya- Area- Renewed emphasis on the Services Sector: To provide a pathway to fulfilling aspirations of a youthful India. The following measures are envisaged under the following pillars to achieve the second Kartavya.
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| Third kartavya: Sabka Sath, Sabka Vikas towards a Viksit Bharat | Third Kartavya- Area 1: Increasing farmer incomes:
Third Kartavya- Area 2-Empowering Divyangjan:
Third Kartavya- Area 3-Empowering the vulnerable to access mental health and trauma care:
Third Kartavya- Area 4- Focus on the Purvodaya States and the North-East Region:
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Budget Tax Proposals- Part B:
Tax Reforms to Boost the Manufacturing Sector:
- Exemption from income tax for five years to non residents providing capital goods, equipment or tooling, to any toll manufacturer in a bonded zone.
- Provision of safe harbour to non-residents for component warehousing in a bonded warehouse.
- Deferred duty payment window to trusted manufacturers.
- Increase the limit for duty-free imports of specified inputs used for processing seafood products for export, from the current 1 per cent to 3 per cent of the FOB value of the previous year’s export turnover.
- Duty-free imports of specified inputs extended to export of shoe uppers in addition to leather or synthetic footwear.
- Extension of time for the export of final product from the existing 6 months to 1 year, for exporters of leather or textile garments, leather and synthetic footwear.
- Exemption from basic customs duty on specified parts used in the manufacture of microwave ovens.
- Exemption from basic customs duty on components and parts used in aircraft manufacturing.
- Exemption from basic customs duty on raw materials imported for manufacture of aircraft parts used in maintenance, repair, or overhaul requirements defence units.
- Regular importers with trusted longstanding supply chains to be recognized in the risk system.
- Export cargo using electronic sealing to be provided through clearance from the factory premises to the ship.
- A special one-time measure to facilitate sale in domestic tariff area at concessional rate of duty by eligible manufacturing units of SEZs.
Tax Proposal for MSMEs- Removal of the current value cap of ₹10 lakh per consignment on courier exports.
Tax Reforms to boost Services Sector:
- Clubbing of services under a single category of information technology services with a common safe harbour margin of 15.5%.
- Safe harbour threshold for IT services increasing from ₹ 300 crore to ₹2,000 crore.
- Approval of safe harbour for IT services by an automated rule-driven process.
- Continuation of safe harbour for a period of five years at the company’s choice.
- Fastracking unilateral APA process for IT services with an aim to conclude it within a period of two years. Can be extended by a further period of six months on the taxpayer’s request.
- Extension of facility of modified returns for APA-availing entities to its associated entities.
- Provision of tax holidays until 2047 to foreign companies providing cloud services to global customers through India-based data centre services. Related Entities providing data center services from India to get a safe-harbour of 15% on cost.
- Exemption to global income of non-resident expert for a stay period of 5 years under notified schemes.
Tax Proposals for Financial Sector:
- Raising the STT on Futures from 0.02% to 0.05%.
- STT on options premium and exercise of options to be raised to 0.15% from rate of 0.1% and 0.125%, respectively.
Tax Proposals for Agriculture Sector:
- Fish catch by an Indian fishing vessel in Exclusive Economic Zone (EEZ) or on the High Seas to be made free of duty. Treating the landing of such fish on foreign port as export of goods.
- Deduction allowed to primary cooperative society engaged to include supply of cattle feed and cotton seed produced by members.
- Allowing inter-cooperative society dividend income as deduction under the new tax regime to the extent distributed to members.
- Exemption from tax dividend income received by a notified national co-operative federation from investments made in companies up to 31.1.2026 from tax for a period of three years. Exemption to be allowed only for dividends distributed to its member co-operatives.
Tax Proposals for Energy Sector:
- Exemption of BCD on import of sodium antimonate for use in manufacture of solar glass.
- Exemption of BCD on import of capital goods required for the processing of critical minerals in India.
- Extending exemption of BCD to capital goods used for the manufacture of Lithium-Ion Cells for batteries to be used in battery energy storage systems.
- Extension of the existing basic customs duty (BCD) exemption on imports of goods required for Nuclear Power Projects till the year 2035 and expand it for all nuclear plants irrespective of their capacity.
- Exclusion of entire value of biogas in Central Excise duty payable on biogas blended CNG.
Proposals for Trust Based Governance:
- Enhancement of duty-deferral period for Tier 2 and Tier 3 Authorised Economic Operators (AEO) from 15 to 30 days. Eligible manufacturer importers to get the same duty deferral facility. Government agencies will be encouraged to leverage AEO accreditation.
- Extension of validity period of advance ruling, binding on Customs, from 3 years to 5 years.
- Transformation of Customs warehousing framework into a warehouse operator centric system with self-declarations etc.
- The filing of Bill of entry by a trusted importer, and arrival of goods to automatically notify Customs.
- Regular importers with trusted longstanding supply chains will be recognized in the risk system, so that the need for verification of their cargo every time can be minimized.
Proposals for Ease of Doing Business and Ease of Living:
- Individual Persons Resident Outside India (PROIs) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS).
- Interest awarded by the motor accident claim tribunal to a natural person will be exempt from Income Tax, and any TDS on this account will be done away with.
- Reduce TCS rate on sale of overseas tour program package from 5% and 20% to 2% without any stipulation of amount.
- Reduce TCS for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) from 5% to 2%.
- TDS on Supply of manpower services to be at the rate of either 1% or 2%.
- Obtaining a lower or nil deduction certificate through rule-based automated process for small taxpayers.
- Enable depositories to accept Form 15G or Form 15H from taxpayers holding securities in multiple companies.Time available for revising returns extended from 31st December to up to 31st March with the payment of a nominal fee.
- Individuals with ITR 1 and ITR 2 returns will continue to file till 31st July and non-audit business cases or trusts are proposed to be allowed time till 31st August.
- TDS on the sale of immovable property by a non-resident to be deducted and deposited through resident buyer’s PAN instead of TAN.
- Introducing a one-time 6-month foreign asset disclosure scheme below a certain size for small taxpayers.
- Allow taxpayers to update their returns even after reassessment proceedings have been initiated at an additional 10 percent tax rate over and above the rate applicable for the relevant year.
- Framework for immunity from penalty and prosecution in the cases of underreporting extended to misreporting.
- Non-production of books of account and documents and requirement of TDS payment is decriminalised.
- Immunity from prosecution with retrospective effect from 1.10.2024 for non-disclosure of non immovable foreign assets with aggregate value less than ₹ 20 lakh.
- Exemption from Minimum Alternate Tax (MAT) to all non-residents who pay tax on presumptive basis.
- Constitute a Joint Committee of Ministry of Corporate Affairs and Central Board of Direct Taxes for incorporating the requirements of Income Computation and Disclosure Standards (ICDS) in the Indian Accounting Standards (IndAS).
- Tax buyback for all types of shareholders as Capital Gains. However, promoters will pay an additional buyback tax.
- Set-off using available MAT credit to be allowed to an extent of 1/4th of the tax liability in the new regime.
- MAT is proposed to be made final tax.
- Exempt BCD on 17 drugs or medicines for cancer patients.
- Single and interconnected digital window for cargo clearance approvals.
- Customs Integrated System (CIS) to be rolled out in 2 years.
- Honest taxpayers willing to settle disputes will now be able close cases by paying an additional amount in lieu of penalty.
