Budget Highlights 2026: FM Sitharaman outlines tax changes, high-speed corridors, and social welfare schemes in record ninth Union Budget

Finance Minister Nirmala Sitharaman announced a sweeping set of indirect tax measures in the Union Budget 2026-27 to simplify the customs tariff structure, boost domestic manufacturing and exports, and correct duty inversions, including phasing out long-standing exemptions for items made in India or with negligible imports.

Key proposals include raising the duty-free import limit for seafood export inputs to 3 per cent of FOB turnover, extending duty-free input benefits to shoe uppers, lengthening export timelines for leather and textile products to one year, expanding customs duty exemptions for lithium-ion battery storage systems, solar glass, nuclear power projects until 2035, and capital goods for processing critical minerals, while also exempting aircraft components and MRO raw materials for civil and defence aviation.

The Budget further cuts personal import duties from 20 per cent to 10 per cent, exempts specified parts for microwave oven manufacturing, waives customs duty on 17 drugs, adds seven rare diseases for duty-free personal imports, and comes alongside an Economic Survey projection of 6.8–7.2 per cent real GDP growth for 2026-27.

The government has allocated Rs 7,84,678 crore for the defence budget in 2026-27, up from Rs 6,81,210 crore last year.

The capital outlay stands at Rs 2,19,306 crore, including Rs 63,733 crore for aircraft and aero engines and Rs 25,023 crore for the naval fleet. Revenue expenditure is pegged at Rs 5,53,668 crore, which includes Rs 1,71,338 crore for pensions.

For 2025-26, the defence budget was Rs 6,81,210 crore, with a capital outlay initially set at Rs 1,80,000 crore, revised to Rs 1,86,454 crore.

Finance Minister Nirmala Sitharaman, in Budget 2026-27, announced measures to boost rural incomes and employment in livestock, fisheries, and high-value agriculture.

A loan-linked capital subsidy scheme will add 20,000+ veterinary professionals and support private colleges, hospitals, labs, and breeding centres.

Fisheries initiatives include development of 500 reservoirs and Amrit Sarovars, coastal value chain support, and backing for startups, women-led groups, and Fish Farmers Producer Organisations.

Agriculture measures cover coconut rejuvenation, cashew and cocoa promotion, sandalwood cultivation, and expansion of walnut, almond, and pine nut orchards in hilly regions, with a focus on value addition and youth engagement.

Finance Minister Nirmala Sitharaman also announced a special one-time measure to allow eligible manufacturing units in Special Economic Zones (SEZs) to sell a limited proportion of their products in the domestic tariff area (DTA) at concessional duty rates. Addressing industry concerns over underutilised capacities amid global trade disruptions, she said necessary regulatory changes will ensure a level playing field with DTA units.

Currently, SEZs operate as foreign territories, allowing duty-free imports for export-oriented production, with domestic sales subject to output duties. SEZ exports totaled USD 176.6 billion in 2024-25.

Finance Minister Nirmala Sitharaman today announced that approvals required for cargo clearance from various government agencies will be streamlined through a single, interconnected digital window by the end of the financial year.

She added that processes related to the clearance of food, drugs, and plant, animal, and wildlife products, which account for nearly 70 percent of interdicted cargo, will be fully operational on the system by April 2026.

The move aims to simplify regulatory approvals, reduce delays, and improve efficiency in cargo handling across sectors, marking a significant step toward digitalising trade facilitation in India.

The Union Cabinet, chaired by Prime Minister Narendra Modi, this morning approved the Union Budget for 2026-27 ahead of its presentation in Parliament, paving the way for Finance Minister Nirmala Sitharaman to table her ninth consecutive Budget in the Lok Sabha.

Investors and economists anticipate a capex-driven, growth-oriented budget with debt reduction, tax rationalisation, export support, and infrastructure development, positioning India as a global investment hub.

Elections in West Bengal, Tamil Nadu, Kerala, Assam, and Puducherry make sectoral allocations politically sensitive, with infrastructure, transport, and social sector spending likely to feature prominently.

Budget 2026-27 will boost medical education, rural healthcare, hospital infrastructure, and digital health platforms, building on prior investments in public health and pandemic preparedness.

Reforms will continue to ease FDI, rationalise labour laws, open nuclear and defence sectors, and incentivise green and digital infrastructure, attracting foreign and domestic investment.

FY26 growth is estimated at 7.4%, with FY27 projected between 6.8–7.2%, reflecting resilient domestic demand, healthy consumption, and strong industrial activity amid global uncertainties.

Measures are likely to target cost-of-living relief, including tax rationalisation, subsidies, and social sector benefits, to protect the middle class and stimulate domestic demand.

India will leverage agreements like the EU Free Trade Agreement, and explore deals with Canada and other global partners, reducing dependence on traditional markets like the US and China, and boosting exports.

The government aims to reduce debt-to-GDP ratio to 49–51% by 2031, reassuring investors and rating agencies of long-term fiscal responsibility, while maintaining growth-oriented expenditure.

Job creation is expected to be a top priority, targeting millions of new entrants to the workforce, with support for skill development, entrepreneurship, and MSME growth, aligning with Make in India and Start-up India objectives.

Budget 2026 is likely to roll out incentives for artificial intelligence, robotics, and advanced manufacturing, positioning India to lead in future-ready industries and attract global investment.

Funding for solar energy expansion, battery storage, and Digital Agriculture initiatives anticipated, aimed at renewable energy adoption, farm productivity, and climate resilience.

Budget 2026 emphasises sustainable fiscal consolidation while outlining multi-year objectives for technology, manufacturing, and export growth, signalling a forward-looking economic strategy.

For the first time, Part B of the Budget speech will receive major focus, detailing direct tax proposals, sector-specific incentives, and citizen-focused measures, giving clarity on implementation rather than just intent.

Allocations are expected for flyovers, arterial roads, housing, and civic amenities, reflecting the government’s commitment to urban development in Union Territories ahead of elections.

Assam will benefit from investments in highways, railways, and flood management, including Rs 1,715 crore in infrastructure upgrades, aimed at enhancing regional integration and trade with neighbouring states.

Funding will continue for highways, urban mobility, coastal infrastructure, flood mitigation, and tourism, ensuring climate-resilient growth and improved quality of life in urban areas.

Budget allocations may back industrial parks, logistics corridors, and port expansion projects, boosting manufacturing and export capacity, and reinforcing Tamil Nadu as a strategic export and industrial hub.

West Bengal is expected to receive allocations for economic corridors (Kolkata-Siliguri), metro expansions, port-linked infrastructure, and highway upgrades, totaling Rs 13,000+ crore, supporting industrial growth and regional trade.

Infrastructure spending will support the Amrit Bharat Station redevelopment, Vande Bharat trains, metro rail expansion, and national highway projects, improving passenger experience, logistics efficiency, and regional connectivity.

Exporters seek measures like lower import duties on critical inputs for textiles, electronics, and chemicals, easier access to long-term financing, and regulatory simplification to mitigate tariff pressures from the US and other markets.

Every Union Budget uses technical terms that explain how public money is raised, spent and tracked.

As Finance Minister Nirmala Sitharaman presents Budget 2026, understanding Budget Estimates, Revised Estimates and Actuals is key. Government income comes from revenue receipts (tax and non-tax) and capital receipts such as borrowings and disinvestment. Spending is divided into revenue expenditure and capital expenditure, with effective capital expenditure reflecting asset creation. Fiscal health is measured through the revenue deficit, fiscal deficit and primary deficit. Learn more.

The Budget will push Make in India 2.0, encouraging strategic resilience and global competitiveness. Policies will likely include incentives for advanced manufacturing, deep-tech, AI, and robotics, ensuring India remains a preferred manufacturing hub.

Structural reforms in the Goods and Services Tax (GST), implemented in September 2025, have led to a recovery in urban demand, higher tax compliance, and improved revenue collections, providing additional fiscal space for growth-supporting policies.

Behind FM Nirmala Sitharaman’s Union Budget 2026, key bureaucrats shape India’s fiscal strategy.

Anuradha Thakur (Economic Affairs), Arvind Shrivastava (Revenue), Vumlunmang Vualnam (Expenditure), M Nagaraju (Financial Services), Arunish Chawla (DIPAM), K Moses Chalai (Public Enterprises), and CEA V Anantha Nageswaran provide guidance on taxation, spending, disinvestment, sectoral policies, and macroeconomic analysis, forming the backbone of the Budget.

Budget 2026 may offer tax relief to salaried individuals, including a hike in the standard deduction from Rs 75,000 to Rs 1 lakh. The government is also expected to simplify the New Tax Regime, reducing compliance burdens and encouraging domestic consumption.

FM Sitharaman today dons a handwoven Kanjeevaram saree for Budget 2026. Showcasing Tamil Nadu’s rich textile heritage, the deep purple Kattam-patterned saree with a subtle golden-brown check and coffee-brown border reflected traditional craftsmanship.

Capital expenditure is projected around 3.1% of GDP (~Rs 13.1 lakh crore), targeting infrastructure, urban development, green energy, digital agriculture, and deep-tech initiatives. This will support job creation and accelerate India’s transition to a knowledge-based economy.

The Defence Ministry is expected to receive a 20% hike in allocation, reflecting heightened border tensions and strategic requirements. Plans include easing FDI norms in defence manufacturing, developing defence industrial corridors, and pursuing a $5.5 billion defence export target by 2029.

Education is expected to be a key focus, with continued allocations to expand medical education by 75,000 seats over 5 years, strengthen IIT infrastructure, and support school retention programs. Budget 2026-27 aims to bridge the gap between near-universal enrolment and learning outcomes, especially at the secondary level.

Retail inflation is below 2%, a major achievement for policymakers. The disinflationary trend, aided by falling food prices and stable energy costs, provides the government flexibility for tax relief measures and helps maintain purchasing power for the middle class.

India is on track to cross the $4 trillion GDP milestone, surpassing Japan to become Asia’s second-largest economy. This is driven by robust manufacturing, strong exports, and domestic consumption, positioning India as a primary engine of global growth.

The Economic Survey 2025-26 sets the stage for the Budget, presenting a comprehensive review of the economy, including 7.4% real GDP growth for FY25-26 and low inflation of 1.7%. The Survey highlights structural reforms, urban demand recovery, and rural income growth as key contributors to India’s macroeconomic resilience.

Total government expenditure is expected to moderate to 13.8% of GDP, compared to 14.2% in FY26. The move highlights the government’s strategy of calibrated fiscal expansion, balancing public investment with efforts to reduce debt burden and maintain economic stability.

Gross market borrowing is projected to rise to Rs 16–16.8 trillion from Rs 14.6 trillion in FY26. The increase is designed to fund infrastructure projects, defence modernisation, and capital-intensive development schemes without compromising fiscal discipline. Net borrowing is expected around Rs 11.6 trillion, reflecting careful debt management.

The fiscal deficit is expected to be set at 4.2% of GDP, slightly lower than FY26’s 4.4%. This reduction shows India’s commitment to gradual fiscal consolidation while maintaining support for growth-oriented initiatives. Analysts suggest this will reassure global investors about India’s macroeconomic stability.

The Union Budget 2026-27 is pegged at Rs 54.1 lakh crore, a 7.9% increase over FY26, signaling the government’s intent to boost development spending while pursuing fiscal prudence. This reflects the largest annual allocation in India’s history and underscores continued investment in infrastructure, health, education, and defence.

Finance Minister Nirmala Sitharaman will make history by presenting her ninth consecutive Union Budget, the first in India to achieve this milestone. The live speech at 11 am in the Lok Sabha is expected to outline both short-term fiscal priorities and a long-term strategic roadmap for the nation’s economy.