India’s Union Budget 2026–27 focuses on higher infrastructure spending, a new-age tax and investment regime, and targeted support for youth, manufacturing, and green growth, while continuing fiscal consolidation.

Big picture of Budget 2026

• Theme revolves around Yuva-driven growth, productivity, and long-term investment in infrastructure, skills, and technology.​

• Fiscal deficit target set at 4.3% of GDP for FY 2026–27, keeping the government on a gradual consolidation path.

• Capital expenditure is pushed up to around ₹12.2 lakh crore, about 9% higher than the previous year, to drive jobs and growth via roads, rail, urban infrastructure and logistics.

• Policy thrust is on manufacturing, services exports, MSMEs, and climate technologies, while simplifying and modernising the tax framework.

Fiscal math and macro stance

• Fiscal deficit: 4.3% of GDP targeted for FY 2026-27, reinforcing commitment to bring it below 4.5% and then move towards a lower debt-to-GDP ratio over the medium term.

• Tax revenues: Gross tax collections for FY26 are estimated around ₹42.7 lakh crore (with about ₹25.2 lakh crore from direct taxes and ₹17.5 lakh crore from indirect taxes), and the budget builds on this base with moderate growth assumptions.​

• Capital expenditure: Outlay of about ₹12.2 lakh crore for FY27, with continued emphasis on transport infrastructure, logistics, and urban development, especially in Tier II and Tier III cities.

• Debt roadmap: The government reiterates its aim of placing central government debt on a declining path as a share of GDP from 2026–27 onwards.

Key sector and policy priorities

1. Infrastructure and logistics

• Public capex of ₹12.2 lakh crore is directed towards highways, railways, high-speed rail corridors, logistics parks, ports, and inland waterways.

• Development of multiple High-Speed Rail corridors to strengthen inter-city connectivity and support economic clusters.​

• Expansion of inland water transport via new National Waterways to link industrial clusters, mining belts and ports, aiming to cut logistics costs.​

• Focus on Tier II and Tier III cities as new growth centers, including creation of City Economic Regions (CERs) with a multi-year allocation to promote urban economic clusters.​

2. Manufacturing, MSMEs and industry

• New schemes to scale domestic manufacturing in strategic and advanced sectors such as construction and infrastructure equipment, containers, and other high-value engineering products.

• Dedicated Container Manufacturing Scheme with a ₹10,000 crore allocation over five years to build globally competitive capacity and reduce import dependence.​

• Support for MSMEs through ecosystem capital (credit, guarantee schemes, technology and market access) rather than only subsidies, to integrate them into supply chains.

• Revival of around 200 legacy industrial clusters via infrastructure, technology upgradation, and improved logistics to enhance cost competitiveness.​

3. Services, startups and digital economy

• Strong emphasis on the services sector as a growth and jobs driver, with an ambition to reach a 10% share of global services trade by 2047.​

• Establishment of a high-powered “Education to Employment and Enterprise” Standing Committee to align education, skills and jobs, and to assess the impact of emerging technologies like AI on employment.​

• Tax holiday until 2047 for foreign companies providing cloud services using Indian data centres, aimed at making India a global data centre and digital services hub.​

• Rationalisation of taxation for software development, ITeS, KPO and contract R&D under a unified “Information Technology Services” category with common safe harbour rules, reducing transfer pricing disputes.​

4. Climate, energy transition and green tech

• Stronger push for climate technologies and industrial decarbonisation, anchored by support for Carbon Capture, Utilisation and Storage (CCUS).​

• Proposed outlay of about ₹20,000 crore over five years for CCUS across power, steel, cement, refinery and chemicals sectors, to improve technology readiness and scale.​

• Broader objective is to combine long-term energy security with cleaner industrial growth and to position India as a hub for climate-tech innovation.

Taxation and regulatory reforms

Direct tax and income tax framework

• Budget operates under the new Income Tax Act 2025, which comes into effect from April 1, 2026, with a focus on simplification and trust-based taxation.

• Introduction of a simplified and modernised Income Tax framework with redesigned rules and forms to reduce compliance burden and make filing easier.

• The government’s strategy is to deepen the new tax regime (introduced earlier with higher rebate limits making income up to about ₹12-12.75 lakh effectively tax-free in FY 2025-26) and gradually phase out the old regime over time.

• Measures to reduce tax litigation: rationalised penalties, decriminalisation of minor offences, and tighter integration of assessment and penalty proceedings, to encourage voluntary compliance.

Corporate tax, IFSC and foreign investment

• Incentive framework refined for sectors such as data centres, cloud services, toll manufacturing and bonded warehousing to attract long-term capital and exports.

• Eligible business income of units in the International Financial Services Centre (IFSC) is proposed to be taxed at 15% (instead of the higher regular corporate rates) for certain income streams, improving its competitiveness as a global financial hub.​

• Tax and regulatory measures aim to make India more attractive for non-resident experts and foreign service providers, including simplified treatment and certain exemptions.

Indirect tax and GST

• GST collections for FY26 are projected at about ₹11.78 lakh crore, with further gains expected from rate rationalisation and better compliance.

• The budget continues with moderate calibration of customs and indirect taxes to support domestic manufacturing while keeping inflation manageable; detailed lists of items becoming cheaper or costlier highlight targeted sectoral nudges.​

What Budget 2026 means for key stakeholders