Finance Minister Nirmala Sitharaman on Sunday, February 1, presented the Union Budget 2026–27, outlining the government’s plans on growth, taxation, spending and sector-wise reforms amid global uncertainty.

Opening her speech in the Lok Sabha, Sitharaman said the government has focused on “delivering reforms over rhetoric,” adding that India’s economic trajectory over the past 12 years has been marked by stability, fiscal discipline and sustained growth despite repeated global disruptions.

She said the Budget is guided by three kartavyas — accelerating and sustaining economic growth, fulfilling the aspirations of the people, and ensuring access to opportunities for every region and community — and described it as a “yuva shakti–driven” Budget.

Fiscal position and government finances

Sitharaman said the government remains committed to fiscal consolidation and debt reduction.

Fiscal deficit

• FY26: 4.4% of GDP
• FY27: 4.3% of GDP
• Total expenditure (FY27): Rs 53.5 lakh crore
• Capital expenditure (FY27): Rs 12.2 lakh crore
• Net market borrowing: Rs 11.7 lakh crore
• Gross market borrowing: Rs 17.2 lakh crore
• Net tax receipts: Rs 28.7 lakh crore
• Debt-to-GDP ratio: 55.6% in FY27

She said the government has accepted the 16th Finance Commission’s recommendation to retain 41 per cent tax devolution to states, with Rs 1.4 lakh crore to be transferred in the coming financial year.

Sectoral allocations

As per the Budget estimates for 2026–27, major sectoral outlays include:

• Defence: Rs 5.95 lakh crore
• Transport: Rs 5.99 lakh crore
• Rural development: Rs 2.73 lakh crore
• Education: Rs 1.39 lakh crore
• Health: Rs 1.04 lakh crore
• Agriculture and allied activities: Rs 1.63 lakh crore
• Energy: Rs 1.09 lakh crore
• Urban development: Rs 85,522 crore
• IT and telecom: Rs 74,560 crore
• Scientific departments: Rs 55,756 crore
• Social welfare: Rs 62,362 crore

Proceedings underway in the Lok Sabha during the Budget Session of Parliament, in New Delhi. Infrastructure and investment

The Budget continues the focus on infrastructure-led growth. Sitharaman announced the setting up of an Infrastructure Risk Guarantee Fund to reduce risks for private developers and proposed dedicated Real Estate Investment Trusts (REIT) to recycle assets of central public sector enterprises.

Other key measures include incentives for large municipal bond issuances, development of an integrated East Coast Industrial Corridor with a major node at Durgapur in West Bengal, provision for 4,000 electric buses and an outlay of Rs 20,000 crore over five years for carbon capture, utilisation and storage.

Manufacturing, MSMEs and exports

To strengthen domestic manufacturing, the Finance Minister announced:

• Rs 40,000 crore for India Semiconductor Mission 2.0
• Electronics manufacturing outlay raised to Rs 40,000 crore
• Setting up of three dedicated chemical parks
• Revival of 200 legacy industrial clusters
• Creation of champion MSMEs
• Rs 10,000-crore Small and Medium Enterprises (SME) Growth Fund and Rs 4,000-crore top-up to the Self-Reliance India Fund
• Biopharma SHAKTI with an outlay of Rs 10,000 crore over five years

To boost exports and manufacturing competitiveness, Sitharaman proposed:

• Raising the duty-free import limit for inputs used in seafood processing for exports from 1 per cent to 3 per cent of Free on Board (FOB) value
• Extending duty-free import benefits from leather and synthetic footwear to shoe uppers
• A one-time measure allowing eligible SEZ units to sell into the domestic tariff area at concessional duty rates, subject to export-linked limits

Transport and waterways

The Budget proposed a Dedicated Freight Corridor connecting Dankuni in West Bengal and Surat in Gujarat, seven high-speed rail corridors and the development of 20 new national waterways over the next five years.

A ship-repair ecosystem for inland waterways will be developed at Varanasi in Uttar Pradesh and Patna in Bihar, while a coastal cargo scheme and incentives for indigenous manufacturing of seaplanes were also announced.

Services, IT and digital economy

Highlighting India’s strength in technology services, Sitharaman said software development, IT-enabled services, knowledge process outsourcing and contract research and development (R&D) services are deeply interconnected.

To simplify the tax framework, she announced:

• All these segments will be clubbed under a single category — Information Technology Services
• A common safe harbour margin of 15.5 per cent applicable to all IT services
• Safe harbour threshold enhanced to Rs 2,000 crore
• Safe harbour approvals to be granted through an automatic, rule-based system
• A tax holiday till 2047 for foreign companies setting up data centres in India for global operations

Services, education and youth

Highlighting the second “kartavya,” Sitharaman said close to 25 crore people have exited multidimensional poverty over the past decade and the next phase of growth will focus on aspirations and capacity building.

She announced a high-powered Education to Employment and Enterprise Standing Committee to position the services sector as a core driver of growth, with a target of achieving a 10 per cent global share by 2047. The panel will assess the impact of artificial intelligence (AI) and emerging technologies on jobs and skills.

Higher education and creative economy

The Budget proposed:

• Setting up the Indian Institute of Creative Technologies in Mumbai for animation, visual effects and gaming
• Animation, visual effects, gaming and comics (AVGC) content creator labs in 15,000 schools and 500 colleges
• Five university townships and academic zones with colleges, skill centres and residential facilities
• One girls’ hostel in every district
• A new National Institute of Design in East India

Tourism, culture and hospitality

Sitharaman said tourism will play a key role in employment generation and local economic growth.

Key announcements include:

• A National Destination Digital Knowledge Grid to digitally document places of cultural and spiritual significance
• Development of 15 archaeological sites, including Lothal and Dholavira inGujarat), Rakhigarhi in Haryana and Sarnath and Hastinapur in Uttar Pradesh, as experiential cultural destinations
• A pilot programme to upskill 10,000 tourist guides at 20 iconic sites through a 12-week hybrid course with an Indian Institute of Management (IIM)
• Setting up a National Institute of Hospitality by upgrading the National Council for Hotel Management and Catering Technology
• Development of ecologically sustainable mountain trails across Himalayan, Eastern and Western Ghats regions
• Creation of five tourism destinations in five Purvodaya states (Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh)

Health and social sectors

The Budget also proposed:

• 50 per cent expansion of capacity in district hospitals through emergency and trauma care centres
• Setting up three new All-India Institutes of Ayurveda
• Upgrading AYUSH pharmacies and the WHO Global Traditional Medicine Centre at Jamnagar
• Establishing five regional medical tourism hubs
• Creating a network of over 1,000 accredited clinical trial sites

To provide relief to patients, Sitharaman announced:

• Basic customs duty exemption on 17 cancer and life-saving drugs
• Addition of seven rare diseases for duty-free personal imports of medicines and special foods

Customs duty rationalisation

To simplify and rationalise customs duties, the Finance Minister proposed reducing the tariff rate on all dutiable goods imported for personal use from 20 per cent to 10 per cent.

Exempting basic customs duty on:

• Raw materials used to manufacture aircraft parts for defence maintenance, repair and overhaul (MRO)
• Capital goods for critical mineral processing in India
• Goods required for nuclear power projects, with the exemption extended till 2035 and expanded to all capacities
• Capital goods used for manufacturing lithium-ion cells for battery energy storage systems
• Sodium antimonate used in manufacturing solar glass

Agriculture and AI

The government will launch Bharat Vistar, a multilingual AI platform integrating agri-stack portals and Indian Council of Agricultural Research (ICAR) practices. A coconut promotion scheme has been announced, along with dedicated programmes for cashew and cocoa to enhance exports and build premium global brands by 2030.

Taxation and compliance

Sitharaman said the Income Tax Act, 2025, will come into force from April 1, replacing the six-decade-old law. The new legislation is revenue-neutral, simplifies compliance and introduces a single “tax year.”

Key tax proposals include extending the deadline for revising returns to March 31 with a nominal fee.

Staggered filing timelines:

• ITR-1 and ITR-2: July 31
• Non-audit business cases and trusts: August 31

Related moves:

• Allowing return updates even after reassessment with a 10 per cent tax
• A six-month foreign asset disclosure scheme for small taxpayers, students, tech professionals and relocated NRIs
• Exempting interest awarded by motor accident claims tribunals from income tax

Banking and markets

The Finance Minister announced a high-level committee on Banking for Viksit Bharat, restructuring of Renewable Energy Certificate (REC) and Power Finance Corporation (PFC), a review of Foreign Exchange Management Act (FEMA) non-debt rules, a market-making framework for corporate bond indices and a higher investment limit for persons of Indian origin.

Outlook

Sitharaman said the Budget seeks to “balance ambition with inclusion” as India moves towards its long-term development goals.

She presented the 15th Budget of the Narendra Modi government and her ninth consecutive Budget.

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