Union Budget 2026-27 Highlights

What Budget 2026-27 Is Really About

The Budget 2026-27 is built on rationalization, reforms, and resilience. The primary goal is stability. By targeting a fiscal deficit of 4.3%, the government is signaling to global investors, and to Indian households, that it is serious about keeping inflation in check.

Key Highlights at a Glance

• Fiscal Discipline Maintained: The fiscal deficit target is set at 4.3% of GDP for FY27, slightly lower than the previous year’s 4.4%, with government debt targeted to reduce to 55.6% of GDP.
• No Changes in Direct Tax Slabs: Personal and corporate income tax rates remain unchanged, providing continuity and predictability for taxpayers and businesses.
• Big Push for Capex: Effective capital expenditure rises to ₹12.2 lakh crore, with a focus on railways, highways, urban infrastructure, and clean energy.
• Sector-Specific Incentives: Major announcements include a 20-year tax holiday for IFSC units, tax breaks for data centres, and a new Biopharma Shakti programme.
• Ease of Doing Business: Measures like decriminalisation of minor offences, rationalised safe harbour rules for IT, and lower pre-deposit for tax disputes aim to reduce compliance friction.

Why Union Budget 2026‑27 Matters to Indian Households

If you have sent money abroad for education or medical treatment, or booked an overseas tour, the Tax Collected at Source (TCS) rates have come down meaningfully. Here is the comparison:

The Practical Impact:

• Earlier: Sending ₹10 lakh for your child’s overseas tuition? You would pay ₹50,000 as TCS upfront (5%), which you could claim back while filing ITR, but it tied up your cash.
• Now: The same ₹10 lakh remittance for education or medical treatment incurs only ₹20,000 TCS (2%).
• For Overseas Travel: Booking a ₹3 lakh foreign tour package? TCS is now a flat 2% (₹6,000), down from a steeper sliding scale.

Furthermore, basic customs duty on dutiable goods for personal use has been halved from 20% to 10%, effective April 2026, alongside revised baggage rules. While direct tax slabs are unchanged, the government has clarified provisions related to house property deductions and sovereign gold bond exemptions, adding certainty.

The Practical Impact:

• Earlier: If you bought a premium smartwatch overseas for ₹50,000 (exceeding your free allowance), you would pay ₹10,000 in duty (20% of ₹50,000).
• Now: For the same purchase after April 2026, the duty payable drops to ₹5,000 (10% of ₹50,000).

This year, the government prioritized no surprises. Tax slabs are unchanged, major policies are extended, and the path is one of consolidation. For you, this means:

• You can plan your annual investments and expenses without fearing a last-minute tax law change.
• Long-term goals like buying a home or funding education feel less risky in a stable policy climate.
• Businesses are more likely to expand and hire when they trust the rules will not change overnight.

What Changed for Businesses and Investors

Corporate India receives both stability and targeted incentives:

• MAT Credit Clarity: For companies opting for the new concessional tax regime, MAT (Minimum Alternate Tax) credit can now be set off (capped at 25% of tax liability).
• Buyback Tax Shift: Taxation of buybacks reverts to capital gains in the hands of shareholders (rather than as dividend income), though promoters will pay an additional tax. This aligns with global practices and can influence corporate restructuring decisions.
• Decriminalisation & Lower Penalties: Several minor offences have been decriminalised, and penalties for delays in audit reports or statement filings have been converted into graded fees. This reduces the fear of prosecution for procedural lapses.
• Safe Harbour Expanded: For IT/ITeS, KPO and contract R&D services, a unified safe harbour margin of 15.5% is introduced with a higher threshold and a block period of five years. This is a big step towards transfer pricing certainty.
• IFSC & Data Centre Incentives: GIFT City units get an extended 20-year tax holiday, while foreign companies using Indian data centres for global services get tax exemption till 2047. This is a clear push to make India a global services hub.

Priority Areas in Budget 2026-27

The budget doubles down on sectors seen as critical for job creation and economic sovereignty:

• Infrastructure: Capital expenditure outlay rises to ₹12.22 lakh crore. Seven high-speed rail corridors, 20 new national waterways, an Infrastructure Risk Guarantee Fund, and continued support for urban development (AMRUT, Urban Challenge Fund) signal a massive build-out.
• Manufacturing: A focused push in electronics, semiconductors, biopharma, textiles, and specialty chemicals includes new schemes like the Container Manufacturing Programme, Mega Textile Parks, and modernisation of 200 legacy industrial clusters.
• Data Centres & Digital Infrastructure: The tax holiday for data centre providers aims to attract global capital and make India a node for cloud and processing services.
• Healthcare: Beyond Ayushman Bharat, the launch of Biopharma Shakti (₹10,000 crore), new AYUSH institutes, plans to create 1.5 lakh caregivers, and medical value tourism hubs show a holistic approach.
• Clean Energy: Funding for Carbon Capture, Utilisation and Storage (CCUS) and continued support for solar and green hydrogen underline the green transition agenda.

Jobs, Skills and Opportunities

The budget explicitly ties growth to employment, with a cross-cutting focus on skills:

• MSMEs are supported via mandatory use of TReDS platforms by CPSEs, the ‘Corporate Mitras’ scheme for compliance help, and the PM Vishwakarma initiative.
• Healthcare sees a drive to create 1 lakh Allied Health Professionals and train 1.5 lakh multi-skilled caregivers, addressing a critical shortage.
• Tourism & Hospitality gets a boost with upskilling for 10,000 tourist guides, a new National Institute of Hospitality, and destination development.
• Education-Industry Linkage is strengthened through plans for university townships near industrial corridors, Animation/VFX labs in schools, and a stronger apprenticeship ecosystem.

Taxes, Savings, and Spending

There have been no changes to the income tax slabs in the Budget 2026. What It means for you:

• Easier financial planning. Your take-home pay calculation remains predictable for another year.
• You continue with simpler, lower tax rates, foregoing deductions like HRA and 80C.
• You can still claim deductions for life insurance (80C), health insurance (80D), HRA, etc. Your strategy stays valid.
• No changes to age-based exemptions or deduction limits, providing peace of mind.

Below is the updated tax slab for the New Tax Regime for the Assessment Year 2026-27:

Below is the updated tax slab for the Old Tax Regime for the Assessment Year 2026-27:

Why Fiscal Discipline Matters

Fiscal discipline is about the government spending wisely and borrowing carefully. It’s about making life more predictable and affordable for Indian households. In the Union Budget 2026‑27, the government is targeting a fiscal deficit of 4.3% of GDP and reducing debt over time.

What Deficit and Debt Control Really Mean

Think of the government as a household: it earns money (taxes), spends on essentials (salaries, subsidies), and borrows if expenses exceed income. Controlling the deficit and debt is like keeping the household budget balanced, it avoids piling up loans that become expensive over time.

How This Affects Interest Rates and Your EMIs

Lower government borrowing can ease pressure on interest rates across the economy. For a typical Indian household, this means:

• Home loans: EMIs rise more slowly, making housing affordable.
• Car loans and personal loans: Borrowing costs stay moderate, helping families plan big purchases.
• Business loans: Small entrepreneurs get cheaper credit, which can sustain jobs in the community.

In simple terms: when the government keeps its finances under control, your monthly budgets and loan repayments become easier to manage.

What to Watch in the Months Ahead?

Budgets are announcements. The real test is execution. Here are the five things worth monitoring as FY 2026-27 unfolds:

The Bottom Line

The Budget 2026-27 is, fundamentally, a consolidation budget with calculated bets. It says: “We have stabilized the fiscal house after COVID. Now we are going to invest heavily in the sectors and capabilities that will define India’s next decade.” This includes manufacturing, digital infrastructure, healthcare, clean energy, and skilling.

The tax reforms, such as decriminalization, safe harbours, and TCS rationalization, are the kind of reforms that would build investor confidence over time. The infrastructure spending, at its highest-ever level, is the kind of sustained commitment that eventually shows up in growth numbers two or three years later.

India’s economy is expected to grow between 6.8% and 7.2% in FY 2026-27. If the government executes what it promised at a reasonable speed, that number is achievable.

Frequently Asked Questions on Budget 2026