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Union Budget 2026: All You Need to Know
By Bajaj Broking Team
February 05, 2026
5 mins read
Union Budget
Summary:
The Union Budget 2026 is based on stable growth, prudent expenditure, and long-term investment. It further scales up capital expenditure, supports critical sectors, and simplifies various tax procedures. The Union Budget further strengthens infrastructure, promotes manufacturing, and modernises regulations for investors and NRIs. With a clear fiscal path and targeted reforms, it aims to balance development with discipline while supporting wider economic growth.
Think of the Union Budget 2026 as a steady, step-by-step plan. It stays focused on growth and discipline, building long-term assets, and still follows the government’s deficit consolidation path.
The government has set the fiscal deficit at 4.3% of GDP for FY27. That means they still plan to borrow less over time and keep the public's money on a more stable path.
Capital spending remains the headline priority, with ₹12.2 trillion allocated for FY27. The idea is to keep investing in transport, energy, digital systems, and other lasting assets that strengthen the economy’s base.
Budget Snapshot: What Else the Union Budget 2026 Covers
If you include grants to states, effective capital expenditure is estimated at ₹17.1 trillion. That jump matters because it suggests the infrastructure push is not just central spending, but also supports state-level asset creation.
Regarding taxation, the Budget makes important changes to rules such as a steeper STT rate on derivatives and a new model for buyback taxation. The overall aim is to ensure greater clarity, transparency, and consistency with capital gains tax treatment.
Large-ticket industries such as the railway, defense, manufacturing, and energy sectors continue to get support. In addition to these, new initiatives are in semiconductors, chemical parks, container manufacturing, and medical research facilities.
The Budget also widens support for agriculture, rural development, and fisheries. The direction here is familiar: improve rural incomes, strengthen supply chains, and support farming regions where logistics and storage still shape outcomes.
Customs duty revisions show up in several places to reduce input costs for exporters and domestic manufacturers. These changes aim to boost competitiveness across electronics, chemicals, textiles, clean energy, and linked supply chains.
Compliance has been made simpler across ITR filing, TDS, and NRI-related rules. The aim is practical: less paperwork, fewer frictions, and a smoother process for individuals and small businesses.
Key Highlights from the Union Budget 2026
Union Budget 2026 focuses on steady growth and tighter control on borrowing. It continues the infrastructure push, supports key industries, and makes some tax and compliance rules simpler.
• The fiscal deficit for FY27 is set at 4.3% of GDP.
• Capital expenditure for FY27 is ₹12.2 trillion.
• Effective capital expenditure is ₹17.1 trillion, after adding grants for states.
• The Centre’s debt-to-GDP ratio is estimated at 55.6% for FY27, with a stated long-term aim of moving towards around 50% (+ or - 1%) by 2030-31.
• Securities Transaction Tax has been increased on derivatives, including futures and options.
• Share buybacks are proposed to be taxed as capital gains for shareholders, instead of the older distribution tax approach.
• Railways, defence, manufacturing, and energy remain key focus areas in spending and support.
• India Semiconductor Mission 2.0 is announced, with a wider scope across the semiconductor value chain.
• A proposal is made for chemical parks to support domestic capacity and reduce import dependence.
• A container manufacturing scheme is proposed with a budget allocation of ₹10,000 crore over five years.
• Agriculture and rural development measures include programmes for cashew, cocoa, coconut, livestock, fisheries, and high-value crops.
• Fertiliser subsidy for FY26 (RE) is revised to ₹1.86 lakh crore, and the FY27 estimate is ₹1.71 lakh crore.
• Customs duty changes are proposed to reduce input costs for selected sectors, including clean energy, critical minerals, and some manufacturing inputs.
• ITR and TDS compliance is proposed to be simpler through timeline and process changes, including steps linked to NRIs.
• TCS on overseas tour packages is proposed to be reduced to 2%.
• Under LRS, TCS for education and medical remittances is proposed to be reduced to 2%.
• For IT services, safe-harbour rules are proposed to be updated, including a higher turnover threshold and process changes.
• A tax holiday until 2047 is proposed for foreign companies providing global cloud services using India-based data centre infrastructure.
• New measures are announced in healthcare and allied areas, including biopharma support, medical tourism hubs, veterinary capacity, and a traditional medicine centre.
Budget Theme: Five Key Priorities
If you step back and look at the Budget 2026 as a whole, five priorities keep showing up. They shape how spending is directed, how reforms are framed, and how the government balances growth with stability.
Fiscal Stability and Measured Consolidation
The Budget keeps to a disciplined route by setting the fiscal deficit at 4.3% of GDP for FY27. The aim is stability first, while still leaving room for development-focused spending.
Strong Push for Capital Investment
Capital expenditure rises again, reaching ₹12.2 trillion for FY27. The priority stays with transport, energy, digital infrastructure, and the kinds of public systems that build economic capacity over time.
Support for Manufacturing and New-Age Industries
Several programmes focus on semiconductors, electronics, chemicals, defence, and clean energy. The measures are designed to expand domestic production, deepen supply chains, and reduce dependence on imports.
Rural Development and Agricultural Strengthening
Targeted support is built around high-value crops, livestock enterprises, fisheries, and rural infrastructure. The main goal is to raise rural incomes and make farming communities more resilient.
Simplified Tax Processes and Better Compliance
The Budget changes the ITR deadlines, lowers the TDS on certain services, and makes the rules for NRIs easier to follow. The message is clear: make it easier for people, small businesses, and returning residents to follow the rules and cut down on paperwork.
Employment & Skilling
A big part of the Budget story is jobs, skills, and the sectors that can keep employing people steadily. The measures link training and opportunity with the kinds of investments that typically create work at scale.
Support continues to build for manufacturing hubs, semiconductor plants, and chemical parks. These programmes will create jobs in engineering, operations, logistics, and technical services, especially in places where big plants need workers for a long time.
Incentives for the electronics industry, pharmaceutical research, container production, and critical minerals further improve employment opportunities. These are sectors shaped by capital investment, supply-chain build-out, and domestic production targets.
The rural economy gets fresh schemes for cashew, cocoa, coconut, livestock, and fisheries. Alongside farm incomes, these programmes also create work for local processors, small rural entrepreneurs, and workers linked to value chains.
Veterinary services expand as well, with plans to add more than twenty thousand trained professionals. Such support is important for the health of livestock, but it also indicates organised employment growth in rural areas.
The services sector is dealt with through medical tourism hubs and simplified tax regulations for the IT sector. Such measures can help employment in the healthcare, hospitality, technology, and support services sectors.
Updated safe-harbour rules and faster Advance Pricing Agreements aim to give IT and consulting firms more operating certainty. In practice, that kind of stability can support expansion decisions and knowledge-based hiring.
Infrastructure spending remains a major job engine, largely because construction and networks need people at many skill levels. Higher capital expenditure continues to support transport links, energy systems, and digital infrastructure.
Pharmaceutical training and research capacity also expands through the biopharma initiative. More accredited trial sites and upgraded institutes can open opportunities for scientists, technicians, and clinical professionals across the research pipeline.
Inclusive Human Resource Development and Social Justice
Alongside growth and investment, the Budget also keeps returning to inclusion and access. The thread running through these measures is opportunity: in health, education, skills, and the kind of protection that reduces vulnerability.
Public health systems receive support through medical research funding, biopharma capacity, and upgraded national institutes. Beyond infrastructure, the intention is to improve access and build stronger training pathways for care delivery.
Medical tourism hubs are planned to expand healthcare infrastructure and bring services closer to communities. Along with treatment capacity, these hubs can also create allied health and support roles across local economies.
Veterinary and livestock services are expanded with more trained professionals in rural areas. This can improve income security for families dependent on animal husbandry, while also strengthening service delivery close to farms.
Targeted programmes for cashew, cocoa, coconut, and coastal crops help diversify rural income. These schemes assist small farmers, women workers, and local producer groups in regions with limited access to markets.
Fisheries support includes reservoir development and value-chain strengthening for inland and coastal workers. The broader purpose is stable incomes and more sustainable growth across communities that rely on fishing.
Customs duty reductions on essential medicines, cancer drugs, and rare-disease treatments aim to reduce cost pressure on families. These revisions focus on affordability where medical needs can otherwise become financially overwhelming.
Simplified tax processes also help small taxpayers, returning students, and young professionals. The one-time disclosure window is meant to ease compliance stress for people with small or accidental foreign asset reporting gaps.
Expanded safe-harbour rules and smoother processes in services are framed as stability measures. In turn, that can support steadier job creation in IT, consulting, and related professional services.
Rural infrastructure is supported again through higher capital expenditure. Better transport, storage, and local facilities can make it easier to access education, healthcare, and employment opportunities in a more connected way.
Manufacturing & Services
If you read this Budget through a competitiveness lens, manufacturing and services sit right at the centre. The focus is technology, supply chains, infrastructure, and the kind of policy clarity that supports long-term investment.
A major push comes through the expanded semiconductor mission, covering design, materials, equipment, and training. The ambition is entry into higher-value supply chains, supported by specialised capacity within India.
Chemical parks are planned to strengthen domestic production in key segments. By offering shared facilities, these clusters can reduce costs for manufacturers and improve export readiness through better infrastructure.
Container manufacturing gets a dedicated programme, linked closely to logistics. The objective is to minimise dependence on imports and enhance the position of India in international shipping networks where the availability of equipment sometimes impacts competitiveness.
Exemptions on capital equipment employed in the processing of critical minerals are beneficial for new industrial capacity. This is particularly important in the production of batteries, electronics, and renewable energy, where natural material and processing value chains impact overall scale.
Electronics production is aided by exemptions on solar glass materials, microwave components, and lithium-ion cell materials.
Services get attention through updated safe-harbour rules, higher turnover thresholds, and simpler tax processes. The overall direction is to reduce friction for IT and consulting operations and support smoother compliance.
A tax holiday until 2047 is introduced for foreign cloud providers operating through India-based data centres. The intention is to attract investment into domestic digital infrastructure and strengthen long-term capacity.
Medical tourism hubs add another services layer by expanding high-quality healthcare offerings. Alongside treatment, these hubs can create jobs in hospitality, patient support, and broader healthcare services.
Tourism corridors for mountains, coasts, and birds are also introduced to widen opportunity. These initiatives can support travel services, local enterprises, and nature-based work across different states.
Export-linked customs duty updates help improve cost efficiency for sectors like leather, footwear, and seafood. Longer timelines for export obligations are positioned to help small and medium manufacturers manage orders more smoothly.
MSME support continues through changes in receivables platforms. TReDS transactions being treated as asset-backed securities is meant to help small businesses access funds with fewer delays.
Urban Development
Urban growth in this Budget is framed as long-term city capacity, not just short-term projects. The focus stays on infrastructure, planning, service delivery, and funding mechanisms that can support sustainable expansion.
Higher capital expenditure supports metro networks, roads, and public transport in major cities. The goal of these investments is to ease traffic and make daily travel for residents more predictable and comfortable.
AMRIT-related projects are still getting support, which helps states improve their water supply, sewage systems, and city services. The goal is to improve the quality of life in cities where services don't keep up with population growth.
Cities can get more help with municipal bonds to raise money locally. Cities that issue bonds worth more than one thousand crore get extra help to make financing stronger and speed up local development plans.
Cleaner cities are still on the agenda, thanks to better systems for managing trash. The new rules are meant to help cities use new technology, recycle more, and better manage their waste streams.
Tourism corridors, such as trekking routes, coastal trails, and birding circuits, link cities with the economies of the surrounding areas. These projects can help businesses in the area, services for visitors, and better connections between the city and nature.
The goal of lowering duties on construction-related inputs is to lower project costs. This can help pay for housing, public buildings, and infrastructure projects planned for the year, where materials often put pressure on budgets.
Digital urban services also receive attention through improved data systems and platforms. Cloud-based tools and updated systems can help cities manage utilities, records, and everyday service requests more smoothly.
Support for MSMEs linked to logistics, transport, and construction strengthens the wider urban economy. The underlying idea is that city projects work better when local supplier ecosystems have easier access to finance.
Overall, urban development continues to be shaped by capital spending, stronger financing access, and targeted support. Together, these choices aim to build more resilient, liveable, and well-serviced urban centres.
Energy Security
Energy in this Budget reads like a long game: clean supply, stable systems, and less dependence on imports. The measures are spread across renewables, storage, minerals, and infrastructure that keeps the grid reliable.
Renewable energy networks receive higher support across solar, wind, and hybrid systems. The purpose is to expand generation capacity while also improving grid stability as renewable share increases.
Duty exemptions for lithium-ion cell components and storage materials lower production costs. This is meant to support domestic battery and storage systems, which are increasingly central to renewable integration.
Capital goods used in critical mineral processing receive duty relief as well. That step is linked to building a raw materials ecosystem for batteries, electronics, and future energy technologies that rely on these inputs.
Nuclear power continues to be supported through extended customs exemptions until 2035. The message here is one of continuity: keep a steady stream of equipment ready for future nuclear projects without imposing unnecessary cost burdens.
Biogas and mixed fuels are also given incentives, with the aim of diversifying energy sources. This is presented as relieving pressure on conventional fuels while increasing access to cleaner sources in the long term.
Transmission infrastructure remains a priority because generation is only part of the story. Better networks help integrate renewables into the grid and reduce regional supply stress when demand shifts.
Duty reductions on solar glass inputs are intended to improve domestic solar manufacturing competitiveness. By reducing input costs, the policy supports scale and more stable supply for panel production.
The Budget also nudges cleaner urban energy use through updated policies. Measures that support electric mobility, efficient lighting, and modern systems aim to make city energy consumption cleaner over time.
Together, these moves aim to build an energy ecosystem that supports growth while limiting risk from import dependence. The focus stays on reliability, cleaner transitions, and the infrastructure needed to sustain both.
Innovation, Research & Development
Innovation in this Budget is positioned as capacity-building: research, skilled institutions, and future-ready industries. The measures span semiconductors, biopharma, clean energy, cloud infrastructure, and specialised materials.
The semiconductor programme expands with a new mission that includes design, materials, equipment, and training. The emphasis is on building capability that can plug into higher-value global supply chains.
A major biopharma initiative receives funding to strengthen research on non-communicable diseases. It includes upgraded laboratories, larger trial networks, and improvements to regulatory systems that shape research credibility.
Three new NIPER institutes are planned, and seven existing ones will be upgraded. These steps aim to strengthen scientific training and improve the quality and scale of pharmaceutical research.
Clean energy innovation is supported through duty exemptions on storage materials and mineral processing equipment. These measures are meant to support the technologies that make renewable systems more reliable and scalable.
A tax holiday for foreign cloud providers operating from India-based data centres is introduced for the long term. This supports digital infrastructure investment and can strengthen research capacity in computing and cloud systems.
Traditional medicine research also receives a push through new facilities and programmes. The focus is on documentation, quality, and developing modern applications that can be used more widely and credibly.
Mining and rare earth processing receive renewed attention as well. This supports industries that depend on specialised materials, including electronics, defence, and advanced manufacturing.
Updated safe-harbour rules and faster Advance Pricing Agreements aim to offer stability for technology companies. That certainty can support research expansion decisions by reducing compliance uncertainty.
Taken together, these initiatives are designed to strengthen scientific capability and support the industries shaping long-term growth. The emphasis stays on building capacity that can hold up over time.
Next Generation Reforms
The Union Budget 2026 brings in a new set of reforms that are focused on improving long-term growth, compliance, and technology-driven development. The reforms are centered around ease, transparency, and simplicity.
The Budget enhances tax simplification for individuals and businesses. Lower TDS rates for certain services and easier TDS certificate issuance ease the burden.
A one-time window is provided for foreign assets held by students, returning NRIs, and young professionals. This allows taxpayers to make small errors without facing severe consequences.
The time limits for filing new returns are revised to give individuals more time. The deadline is now extended to 31st March.
Safe-harbour rules for IT services undergo a complete overhaul. A higher turnover limit and a unified margin create clearer compliance for companies operating at scale.
Advance Pricing Agreements are streamlined through automated processing and faster resolution. This gives greater certainty to multinationals working in India.
The government also takes steps to deepen India’s bond markets. Proposed reforms aim to strengthen the market-making ecosystem and improve liquidity for corporate bonds.
Rules for municipal bonds are revised to attract more cities. Incentives for large issuances help local governments raise funds for development projects.
New guidelines for SEZ units allow domestic sales at concessional duty rates within specified limits. This supports manufacturing units seeking larger markets.
Exporters in sectors such as textiles, leather, and footwear receive longer timelines to fulfil export obligations. This helps small businesses manage inventory and orders more smoothly.
Duty exemptions on capital goods for critical minerals support emerging industries, including batteries, electronics, and clean energy technologies.
These reforms together aim to modernise administration, reduce friction for businesses, and support economic growth driven by technology, compliance efficiency, and global competitiveness.
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Published Date :
05 Feb 2026
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