No direct boost, Budget turns to structural levers to support consumption

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• Budget 2026 shifts from broad tax relief to targeted cost and cash-flow measures
• Customs duty exemptions on cancer and rare disease drugs to reduce costs
• TCS on foreign tours, overseas education, and medical treatment cut to 2 percent

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The Budget 2026, presented on February 1, marks a shift in how the government is seeking to support consumption, moving away from broad-based income tax relief and instead relying on targeted measures aimed at lowering costs, easing cash-flow pressures and simplifying compliance, analysts said.

Unlike the previous budget, which directly boosted disposable income through income-tax slab cuts, this year’s proposals do not offer across-the-board tax relief to households. Instead, the focus is on incremental interventions that could support demand more gradually.

These include customs duty exemptions on cancer drugs and treatments for rare diseases, a move expected to reduce healthcare-related expenses for affected families.

The budget has also halved import duty on personal imports to 10 percent, which could lower the landed cost of gadgets, electronics, fashion and lifestyle products purchased from overseas.

Cash-flow relief features prominently, with Tax Collected at Source (TCS) on foreign tour packages cut sharply to 2 percent from 20 percent. TCS on overseas education and medical treatment has also been reduced to 2 percent from 5 percent, easing the upfront burden on families funding studies or specialised care abroad.

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Prices of select consumer durables could see moderation following duty exemptions on parts imported for microwave ovens. For small taxpayers, compliance-related measures such as simplified nil or lower TDS deduction certificates and a single, one-time submission of Form 15G and 15H to depositories are intended to reduce excess tax deduction on interest and dividend income. The exemption of interest on compensation awarded by Motor Accident Claims Tribunals provides targeted relief to affected households.

Rural consumption is addressed through measures aimed at promoting entrepreneurship and improving productivity to boost farm incomes, while a broader push for domestic manufacturing, skilling and job creation is expected to support employment-led consumption over time.

Analysts said the approach needs to be seen in the context of India’s income profile. With per capita GDP still around $2,500–$2,700 in nominal terms, household spending remains highly sensitive to prices, taxes and liquidity. Incremental cost reductions and cash-flow relief, they noted, can therefore have a meaningful impact on demand even in the absence of direct income transfers.