India’s Union Budget 2026-27 lays the groundwork for long-term growth with a sharp focus on infrastructure, manufacturing, and inclusive development. Instead of big giveaways, this budget focuses on building capacity, boosting productivity, and simplifying tax rules – all while staying on a responsible fiscal path.
Here’s a breakdown of what matters most.
Income Tax Overhaul: A Simpler System from 2026
The Income Tax Act 2025 will take full effect from April 1, 2026, replacing the old 1961 law. It’s more than a revision-it’s a complete rewrite.
Key changes:
- The confusing “Assessment Year” is gone. Income will now be taxed in the same year it’s earned (called the Tax Year).
- Fewer sections: The law has been trimmed from 700+ to 536 sections, making it easier to follow.
- No change in tax slabs or rates for FY 2026-27 – but more flexibility in deadlines and revisions.
Relief measures:
- Extended deadline for filing revised returns (till March 31 of the following year)
- Reduced TCS on remittances for education and health (from 5% to 2%)
- Tax exemptions for interest on accident claims, disability pensions, and small investors.
Personal Income Tax Update:
- Tax slabs and rates remain the same under both the new regime and the old regime for FY 2026-27.
- The government has chosen stability during the transition to the new Income Tax Act 2025, which takes effect from April 1, 2026.
However, several tax-related relief measures and structural changes were announced:
Key Tax Changes (Non-Slab):
| Change | Details |
|---|---|
| New “Tax Year” System | Replaces the old “Assessment Year” model; income is now taxed in the same year it is earned. |
| TCS Rate Reduction | TCS on foreign remittances for education and medical expenses reduced from 5% to 2%. |
| Revised Return Window Extended | You can now revise your ITR until March 31 of the succeeding tax year, with a small fee. |
| Exemptions Introduced | Tax-free interest on Motor Accident Claims; TDS removed. Disability pensions for armed forces are exempt. |
| Sovereign Gold Bonds (SGB) | Capital gains exemption only for original subscribers who hold till maturity. |
| Capital Gains on Buybacks | Now taxed as capital gains in shareholder hands instead of dividend income. |
So while slabs stayed untouched, the overall filing experience and compliance system is being modernized and made simpler.
Big Push on Infrastructure: ₹12.2 Lakh Crore Capex
Infrastructure continues to be the heart of India’s growth strategy.
Seven New High-Speed Rail Corridors Announced:
- Mumbai–Pune
- Pune–Hyderabad
- Hyderabad–Bengaluru
- Chennai–Bengaluru
- Hyderabad–Chennai
- Delhi–Varanasi
- Varanasi–Siliguri
These corridors will connect key tech, industrial, and cultural hubs, forming a “High-Speed Quadrilateral” in South India.
National Waterways & Coastal Shipping
- 20 new National Waterways will be developed
- Goal: Double inland shipping’s share in transport from 6% to 12% by 2047.
Manufacturing for the Future
India is shifting from low-end assembly to high-tech leadership.
Key missions:
- Biopharma SHAKTI: ₹10,000 crore over 5 years to boost biologics and biosimilars like cancer and diabetes drugs.
- Indian Semiconductor Mission 2.0: Focus on chip design and materials, not just fabs.
- Electronics Manufacturing: ₹40,000 crore to scale up domestic production of electronic components.
- Rare Earth Corridors: In Odisha, Kerala, Andhra, and Tamil Nadu to support green energy and defense sectors.
Rural India: A New Employment Model
The well-known MGNREGA scheme has evolved into VB-G RAM G (Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission).
What’s new:
- 125 days of guaranteed rural employment (up from 100)
- Adjusted calendar to avoid peak farming seasons
- Bigger state role in implementation
- ₹95,692 crore allocated for the year.
Tech support also expands with Bharat-VISTAAR, a multilingual AI assistant for farmers.
MSMEs Get a Boost
India’s small businesses – key to jobs and innovation – get new support:
- SME Growth Fund: ₹10,000 crore to help small firms grow
- TReDS mandatory for government purchases, speeding up payments
- “Corporate Mitras”: Trained professionals to help MSMEs handle compliance affordably
- Courier export limits removed, aiding small e-commerce players.
Education, Creativity & the Youth Economy
The budget lays the foundation for a future-ready workforce:
- ₹1.39 lakh crore for education
- 5 university townships near industrial zones
- Indian Institute of Creative Technologies in Mumbai
- 15,000 schools and 500 colleges to get animation/VFX/gaming labs.
Women’s Empowerment: “She MARTS” & More
Women are at the center of several new schemes:
- “She MARTS”: Community-run retail outlets by women entrepreneurs
- A girls’ hostel in every district to support female STEM education
- Gender Budget allocation at an all-time high: ₹4.49 lakh crore.
Green Energy and Sustainability
Big steps toward India’s net-zero 2070 goal:
- Small Modular Nuclear Reactors: ₹20,000 crore R&D fund
- Carbon Capture: ₹20,000 crore to support clean industry
- Rooftop Solar: Up to 300 units/month free for 1 crore homes
- Green Hydrogen Mission: Aim to produce 5 million metric tons annually by 2030.
Defense Modernization: ₹7.84 Lakh Crore Allocation
Defense sees a record allocation:
- Capital outlay: ₹2.19 lakh crore for aircraft, ships, and R&D
- 75% of modernization spend to go to domestic industry
- Support for startups via iDEX, with ₹449 crore to fund new-age tech like AI and drones.
Fiscal Discipline and Growth Outlook
- Fiscal deficit target: 4.3% of GDP (down from 4.4%)
- Nominal GDP projected at ₹393 trillion with 10% growth
- Capital expenditure: ₹12.2 lakh crore
- Total budget size: ₹53.5 lakh crore.
India is staying on track to lower debt, build investor trust, and maintain macroeconomic stability even in a globally uncertain environment.
Final Thoughts
Union Budget 2026-27 doesn’t just look at this year – it’s planning for the next two decades. From tax simplification and MSME growth to futuristic transport and green energy, this budget sets the stage for India’s transition to a developed economy by 2047.
FAQs: Union Budget 2026-27
Q: Are there any changes in income tax rates?
No, the income tax slabs remain unchanged for FY 2026-27.
Q: What is the new “Tax Year” system?
From April 1, 2026, taxes will be filed for the same year income is earned – no more assessment year confusion.
Q: Which sectors saw the biggest investments?
infrastructure, manufacturing (biotech, semiconductors), defense, education, and green energy.
Q: What is VB-G RAM G?
It’s the new rural job guarantee scheme replacing MGNREGA, offering 125 days of employment per year.
Key Takeaways
- Major simplification of income tax law
- Record capex spend to fuel infrastructure and jobs
- Big bets on tech, green energy, and women-led businesses
- Steady economic growth with fiscal restraint
