Union Budget [2026-27]

[Presented on 1st February, 2026]

(For the period 01-04-2026 to 31-03-2027)

The Union budget is the annual financial report of India, an estimate of income and expenditure of Government of India on a periodical basis. As per Article 112 of the Constitution it is a compulsory task of the Union Government.

The first budget of India was presented on 18th February, 1860 by Mr. Scotsman James Wilson. The first budget of independent India was presented by Sh. RK Shanmukham Chetty on 26th November, 1947.

The Union budget is prepared by the Union Finance Ministry and is presented by the Union Finance Minister in the Parliament on 1st February of every year.

Previously, the Union Budget used to be presented on the last day of February each year, but the Modi government changed this date to 1st February of every year from the year 2017 so that the legislative approvals for annual spending plans and tax proposals could be completed before the beginning of the new financial year on 1st April. There used to be a separate Rail Budget as well, but the Modi Government withdrew the practice of separate rail budget and general budget. Now, only the general budget is introduced in parliament every year from the year 2017.

Sh. Moraji Desai presented the Union budget for maximum number of times (10 times).

The Union finance Minister Smt. Nirmala Sita Raman presented her 9th regular budget for the year 2026-27 in the parliament on 1st February, 2026. This is her 9th budget. This is our paperless budget presented on tab (tablet) kept inside traditional Bahi Khata instead of briefcase. As 2024 was an election year, the Union finance minister also presented her 2nd Union interim budget or (vote on account) on 1st February, 2024.

What is an Interim Budget?

An interim budget is presented by the Government of India in the run-up to the general elections.

• Interim budgets are usually focused on outlining the government's proposed spending plans for the next few months rather than for the entire fiscal year.

• It is a statement of the government's financial position and includes estimates of revenue and expenditure for the next financial year but does not include any new policy announcements or proposed tax changes.

• The logic behind the interim budget is that the government which presents the interim budget may not be in power when the full budget is presented later in the year.

• The incoming government, which will hold power after elections, typically presents its own full budget after the general election.

Constitutional Provisions

o According to Article 112 of the Indian Constitution, the Union Budget of a year is referred to as the Annual Financial Statement (AFS).

o It is a statement of the estimated receipts and expenditure of the Government in a Financial Year (which begins on 1st April of the current year and ends on 31st March of the following year).

Overall, the Budget contains:

o Estimates of revenue and capital receipts,

o Ways and means to raise the revenue,

o Estimates of expenditure,

o Details of the actual receipts and expenditure of the closing financial year and the reasons for any deficit or surplus in that year, and

o The economic and financial policy of the coming year, i.e., taxation proposals, prospects of revenue, spending programme and introduction of new schemes/projects.

o The Budget Division of the Department of Economic Affairs in the Ministry of Finance is the nodal body responsible for preparing the Budget.

Estimate of sources of Income and Expenditure of Union Government (2026-27)

(Period 01-04-2026 to 31-03-2027)

• Income from Income Tax is estimated to be the biggest source of revenue of Union Government (21%) followed by Corporation Tax (18%) in the financial year 2026-27.

• When it comes to the expenditure the highest amount goes towards state share of taxes and Duties (22%) followed by the interest payment (20%), and expenditure on defence will be 11% of the total expenditure.

• Easier to file Income Tax returns, 3 months Extra time to file revised return, reduction in penalty and imprisonment.

Budget Estimates

• Total receipts 44.04 lakh crore.

• Total expenditure: 53.47 lakh crore.

Budget Highlights (2026-27)

1. INCOME TAX

FM announces no changes in tax regime

Present Income Tax regime

Income (in Rs)

0-4Lakh rupees____________Nil

4-8Lakh rupees____________5%

8-12 Lakh rupees____________10%

12-16Lakh rupees____________15%

16-20Lakh rupees____________20%

20-24Lakh rupees___________25%

24Lakh rupees & above___________30%

(The slab of 25% was introduced from last year)

No change in Income tax rebate limit Rs. 7 Lakh to 12 Lakh (Rs. 12.75 Lakh for Salaried class). This means Income upto 12 Lakh(12.75 Lakh for salaried class) can be Income Tax free.

1. WHAT will be CHEAPER

• 17 cancer medicines

• 7 critical medicines

• Electric Cars, Solar panels, leather, synthetic shoes, foreign travel, clothes, Microwave, study abroad.

2. WHAT will be COSTLIER

• Scrap, Liquor, Tobacco Products, Luxury watches, Designer clothes, Premium footwear, Coffee Machine, ATM and Cash Dispenser, Imported cheap umbrellas, Zoo animals and birds imported.

Highlights of this budget

Budget theme

1. Yuva Shakti–driven growth: Converting India’s demographic dividend into productive capacity through skilling, employment, and enterprise creation.

2. Three Kartavya (duties) guiding this year’s Budget:

- Accelerating and sustaining economic growth by enhancing productivity, competitiveness, and resilience amid volatile global dynamics.

- Fulfilling aspirations and building capacity by strengthening human capital, skills, and institutional capabilities.

- Advancing Sabka Sath, Sabka Vikas by ensuring equitable access to opportunities across regions, communities, and sectors.

3. Investment-led development focus: Scaling manufacturing in strategic and frontier sectors.

- Strengthening MSMEs as growth partners and supply-chain anchors.

- Reinforcing services as a core driver of growth, employment, and exports.

4. Strengthening India’s investment ecosystem: Sustained public capital expenditure to crowd in private investment.

- Infrastructure-led regional development, especially in Tier II and Tier III cities.

- Long-term energy security, climate technologies, and resource resilience.

5. Enhancing ease of doing business and capital flows:

- Regulatory simplification, tax certainty, and trust-based compliance.

- Measures to improve FDI facilitation, portfolio investment, and global integration.

- Launch of an Investment Friendliness Index of States in 2025, aimed at promoting competitive cooperative federalism and encouraging states to strengthen policy frameworks, facilitation mechanisms, and investor responsiveness.

Biopharma

The Union Budget 2026–27 places biopharmaceuticals at the centre of India’s strategy to scale up manufacturing in strategic and frontier sectors. To support the development of India as a global biopharma manufacturing hub, the Budget introduces a comprehensive framework to create an ecosystem, build capacity, and enable clinical research:

1. Biopharma SHAKTI

2. Institutional and Talent Capacity Development

3. Clinical Research and Regulatory Infrastructure

Manufacturing

Through targeted schemes, cluster-based development, and capacity expansion, the Budget aims to create an enabling environment for long-term industrial investment in India. Key initiatives to scale up manufacturing in strategic and frontier sectors include:

1. Biopharma SHAKTI Scheme: To develop India as a global biopharma manufacturing hub through ecosystem-led capacity creation

2. India Semiconductor Mission (ISM) 2.0: To expand India’s semiconductor capabilities across equipment, materials, design, and supply-chain resilience, with an enhanced outlay of ₹40,000 crore.

3. Electronics Components Manufacturing Scheme: Outlay to be increased to ₹40,000 crore to deepen domestic value addition and capitalise on rising investment momentum.

4. Rare Earth Corridors: Establishment of dedicated corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to promote mining, processing, research, and manufacturing of rare earth materials.

5. Chemical Manufacturing Infrastructure: Support for States to establish three dedicated Chemical Parks on a cluster-based, plug-and-play model to strengthen domestic chemical production.

6. Construction and Infrastructure Equipment (CIE): Introduction of a scheme to enhance domestic manufacturing of high-value and technologically advanced construction and infrastructure equipment.

7. Container Manufacturing: Launch of a dedicated Container Manufacturing Scheme with a budgetary allocation of ₹10,000 crore over five years to build globally competitive capacity.

8. Rejuvenation of Legacy Industrial Clusters: Introduction of a scheme to revive 200 legacy industrial clusters through infrastructure and technology upgradation to improve cost competitiveness and efficiency

Textiles

Key measures for the textile sector include:

1. Integrated Textile Programme comprising five components: National Fibre Scheme to support self-reliance in natural, man-made, and new-age fibres

- Textile Expansion and Employment Scheme to modernise traditional clusters through capital support for machinery and technology upgradation.

- National Handloom and Handicraft Programme to integrate and strengthen existing schemes for artisans and weavers.

- Tex-Eco Initiative to promote globally competitive and sustainable textiles and apparel.

- Samarth 2.0 to modernise and upgrade the textile skilling ecosystem through industry and academic collaboration

These measures aim to enhance productivity, support value addition, and strengthen India's position in global textile and apparel markets.

Infrastructure

The Union Budget maintains a strong focus on public capital expenditure to support logistics efficiency, urban development, and industrial expansion, thereby crowding in private investment.

Champion SMEs and Micro Enterprises

Recognising MSMEs as a critical driver of employment, exports, and supply-chain resilience, the Budget introduces targeted measures to support their scale-up and formalisation.

Digital Infrastructure and Data Centres

The budget places digital infrastructure at the centre of India’s investment-led growth strategy, recognising data centres and cloud services as critical enablers of the digital economy, artificial intelligence, and next-generation services. The Budget signals long-term policy stability and regulatory certainty, supporting large-scale investments in data storage, processing, and digital service delivery.

Education, Skills and Services-Led Growth

The Union Budget 2026–27 reinforces the role of services as a core driver of growth, employment, and exports, supported by targeted institutional and skills-building interventions.

AVGC and Creative Economy

The Budget recognises the growing role of the creative economy or the Orange Economy as a source of skilled employment and export potential.

Climate Technologies and Energy Transition

The Budget strengthens India’s commitment to climate action and industrial decarbonisation through targeted support for emerging clean technologies.

Healthcare and Medical Value Tourism

The Budget emphasises strengthening healthcare services and positioning India as a global destination for medical value tourism.

Tourism

This year’s Budget has adopted a comprehensive approach to strengthen tourism infrastructure, enhance skills development, and leverage digital platforms to improve visitor experiences and destination management.

Tax Reforms

- Introduction of a simplified and modernised Income Tax framework, with redesigned rules and forms to reduce compliance complexity and improve ease of filing.

- Tax holiday till 2047 for foreign companies providing cloud services using data centre infrastructure in India, aimed at strengthening India’s position as a global data centre and digital services hub.

- Measures to reduce litigation and improve trust-based tax administration, including rationalisation of penalties, decriminalisation of minor offences, and integration of assessment and penalty proceedings.

- Extension and rationalisation of safe harbour provisions, particularly for Information Technology and IT-enabled services, to provide greater certainty on transfer pricing and tax outcomes.

- Targeted tax measures to support manufacturing, services, and export-oriented sectors, including incentives for data centres, cloud services, toll manufacturing, and bonded warehousing.

- Reforms to support foreign investment and global mobility, including exemptions and simplified tax treatment for non-resident experts and foreign service providers operating from India.

- Rationalisation of customs and indirect tax provisions to support energy transition, critical minerals, electronics manufacturing, and export competitiveness.

- Continued emphasis on predictability, transparency, and stability in the tax regime, aimed at improving India’s overall investment climate and long-term investor confidence.

Customs reforms

- Simplification of the customs tariff structure to support domestic manufacturing, promote export competitiveness, and correct duty inversion.

- Phased removal of long-standing customs duty exemptions on items manufactured domestically or where imports are negligible.

- Incorporation of effective rates from customs notifications directly into the tariff schedule to improve transparency and certainty for businesses.

- Expansion of duty-free and concessional duty provisions to support export-oriented sectors, including marine products, leather, textiles, electronics, and energy transition technologies.

- Enhanced trust-based customs systems, including extended duty deferment periods and greater facilitation for authorised and compliant importers, to enable faster clearance and reduced transaction costs.

- Measures to improve customs processes through automation and risk-based assessments, supporting smoother movement of goods across borders and strengthening India’s trade facilitation framework.

Notable Facts:-

- India is the 4th largest economy in the world in terms of GDP.

We will be the 3rd Largest Economy by 2028 and will leave behind Germany. We want to make India a 5 trillion US $ economy by 2029 and a developed country by 2047. When Modi Government came to power in 2014, our position was tenth in the world in terms of GDP. By the end of Amrit kaal in 2047, we will be a developed country.

Note:

Although GDP wise, our position is 4th bit per capita Income in India is still very low (2934 US $) in comparison to USA, China, Germany and Japan.