Union Budget Key Highlights 2026-27: Major Announcements, Tax Changes & Economic Impact

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International Women’s Day once centred on representation. In 2026, the conversation is about economic agency - the ability to make decisions backed by financial independence. For a woman entrepreneur, freedom means access to timely capital to refine strategy, steady liquidity to expand operations, structured cash flow management to maintain stability, and the economic strength to sustain her business and her legacy. 

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As per the budget, India will continue to take confident steps towards Viksit Bharat, balancing ambition with inclusion. As a growing economy, the country must stay deeply integrated with global markets, expand exports and attract stable long-term investment to sustain growth. Here’s the Union Budget 2026 at a glance.

1. Driving Manufacturing, Technology and Strategic Capabilities

A major focus of Budget 2026 is on building competitive manufacturing and technology ecosystems.

• Biopharma SHAKTI

  • The government announced Biopharma SHAKTI, a ₹10,000 crore initiative over five years to position India as a global biopharma manufacturing hub.  
  • The programme will strengthen domestic production of biologics and biosimilars, critical for addressing non-communicable diseases. 
  • It includes a biopharma-focused network, three new National Institutes of Pharmaceutical Education and Research (NIPERs), upgradation of seven existing institutes and creation of 1,000+ accredited clinical trial sites.
     

• ISM 2.0

  • The launch of ISM 2.0 will focus on producing semiconductor equipment and materials, developing full-stack Indian intellectual property and fortifying supply chains.  
  • Industry-led research and training centres will help build advanced technology capabilities and a skilled semiconductor workforce.
  • The Electronics Components Manufacturing Scheme, launched in April 2025 with an outlay of ₹22,919 crore, has already attracted investment commitments at more than double the target. 
  • To capitalise on this momentum, the government has proposed increasing the outlay to ₹40,000 crore, strengthening India’s role in global electronics supply chains.
     

2. Strengthening Capital Goods and Textiles

To reduce import dependence in critical minerals, dedicated Rare Earth Corridors will be developed in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu, covering mining, processing, research, and manufacturing of rare earth permanent magnets.

To boost productivity and quality across sectors, the government has announced steps to strengthen capital goods manufacturing. This includes setting up Hi-Tech Tool Rooms by Central Public Sector Enterprises (CPSEs) at two locations as digitally enabled precision manufacturing service bureaus. 

A Construction and Infrastructure Equipment (CIE) Enhancement Scheme will support advanced equipment manufacturing, while a ₹10,000 crore, five-year Container Manufacturing Scheme aims to build a globally competitive ecosystem.

For the labour-intensive textile sector, an Integrated Textile Programme was announced with five components:

• The National Fibre Scheme for self-reliance in fibres

• A Textile Expansion and Employment Scheme to modernise clusters

• A National Handloom and Handicraft Programme for artisans

• The Tex-Eco Initiative for sustainable textiles, and 

• Samarth 2.0 to upgrade the textile skilling ecosystem.
   

3. Empowering MSMEs to grow as “Champions”

Recognising MSMEs as a key growth engine, the government unveiled a three-pronged strategy to create ‘Champion SMEs’. This includes 

• Equity support through a ₹10,000 crore SME Growth Fund and a ₹2,000 crore top-up to the Self-Reliant India Fund for micro enterprises. 

• Liquidity support will be strengthened through expanded use of TReDS.  

• Professional support will be provided via trained ‘Corporate Mitras’ to help MSMEs meet compliance needs affordably in Tier-II and Tier-III.
   

4. Infrastructure, Urban Growth and Connectivity

Public infrastructure remains a central pillar of the Budget. Public capital expenditure will rise to ₹12.2 lakh crore in FY27, reinforcing momentum built over the past decade. The government will continue leveraging InVITs, REITs, NIIF and NABFID, alongside setting up an Infrastructure Risk Guarantee Fund to crowd in private investment. 

To enhance green and multimodal connectivity, the Budget proposes 

• New freight corridors, 

• 20 national waterways over five years, 

• Coastal cargo promotion,  

• Incentives for seaplane manufacturing and operations.

Tier II and Tier III cities and temple towns will be developed as growth engines through City Economic Regions (CERs). Each CER will receive ₹5,000 crore over five years, allocated through a reform-linked, results-based challenge mode. Additionally, seven high-speed rail corridors will be developed as inter-city growth connectors.
 

5. Medical Tourism Promotion and AYUSH 

The Union Budget 2026 announced a scheme to set up five regional Medical Hubs by partnering with private sector. These hubs will combine medical services, education, AYUSH centres, etc. Three new All India Institutes of Ayurveda will be set up and AYUSH pharmacies and drug testing labs shall be upgraded. The FM proposed to upgrade the WHO Global Traditional Medicine Centre in Jamnagar to bolster research and training.
 

6. GDP, Fiscal Deficit and Debt Outlook

The Budget reiterates the government’s commitment to fiscal consolidation without compromising social priorities. As outlined earlier, the Centre is working towards a debt-to-GDP ratio of 50 ± 1% by 2030-31. In line with this path, the debt-to-GDP ratio is estimated to decline to 55.6% in BE 2026-27, compared to 56.1% in RE 2025-26, indicating a gradual but steady improvement in public finances. 

The fiscal deficit has been brought below the 4.5% threshold as committed. It is estimated at 4.4% of GDP in RE 2025-26 and further reduced to 4.3% of GDP in BE 2026-27. 

A declining deficit and debt trajectory is expected to lower interest outgo over time and free up resources for priority growth-oriented expenditure.
 

7. Financial Sector and Capital Markets

A High-Level Committee on Banking for Viksit Bharat will undertake a comprehensive review. The restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) aims to strengthen public sector NBFCs, while FEMA rules will be reviewed to improve the investment climate. 

To deepen capital markets, a market-making framework for corporate bonds will be introduced, along with derivatives on bond indices and total return swaps. For urban infrastructure financing, a ₹100 crore incentive will be offered for municipal bond issuances exceeding ₹1,000 crore, alongside continued AMRUT support for smaller towns.
 

8. Jobs, Skills and Human Capital

Human capital development is a strong focus area. The Budget targets:

• 1 lakh Allied Health Professionals over five years and 1.5 lakh caregivers annually

• Five Regional Medical Value Tourism Hubs 

• AVGC Creator Labs in 15,000 schools and 500 colleges

• A new National Institute of Design in eastern India

• Five University Townships near industrial corridors

• One girls’ hostel in every district to support STEM education 

• Launch of a Khelo India Mission to transform sports and related employment
   

9. Tourism, Culture and Heritage

Fifteen archaeological sites, including Lothal, Dholavira, Sarnath, and Hastinapur, will be developed as experiential destinations. A National Destination Digital Knowledge Grid will document cultural and heritage sites, supported by ecotourism trails, guide upskilling, and India hosting the Global Big Cat Summit.

10. Agriculture, Inclusion and Regional Balance

The Budget prioritises farmer incomes and rural livelihoods through fisheries development in 500 reservoirs, support for high-value crops, a Coconut Promotion Scheme and Bharat-VISTAAR, an AI-powered farm advisory platform.

Social inclusion measures include SHE-Marts for women entrepreneurs, Divyangjan Kaushal and Divyang Sahara Yojanas, expanded mental health infrastructure, and focused development of Purvodaya and North-Eastern regions.
 

11. Direct Tax Reforms: Simplification and Relief 

The Income Tax Act, 2025 will be effective from April 1, 2026. It will bring simplified rules and redesigned forms to make tax compliance more citizen friendly.

Significant relief measures include:

• Full tax exemption on interest awarded by Motor Accident Claims Tribunals, with no TDS requirement. 

• TCS rates have been reduced to 2% on overseas tour packages and on education and medical remittances under the Liberalised Remittance Scheme (LRS). 

• Taxpayers will also benefit from extended timelines for filing revised and belated returns until March 31, staggered ITR due dates, and easier online processes for obtaining lower or nil TDS certificates.

• A one-time Foreign Asset Disclosure Scheme (FAST-DS 2026) has been introduced for small taxpayers. 

• Targeted relief has also been extended to cooperative societies through expanded deductions and dividend exemptions.
  
  

12. Customs, Trade and Ease of Doing Business

On the customs and trade front, the Budget pushes India decisively towards trust-based, technology-driven border management. A single digital window for clearances will be operationalised by FY26, supported by AI-enabled risk assessment and expanded benefits for Authorised Economic Operators (AEOs).

Export competitiveness will be enhanced through the removal of the ₹10 lakh cap on courier exports, while customs duty on personal imports has been reduced to 10%.

Relief has also been extended to patients through full customs duty exemption on 17 cancer drugs and treatments for seven rare diseases. Additional reforms include faster cargo clearance, electronic sealing for exports, warehouse modernisation, and reduced transaction costs for businesses engaged in global trade.

13. Other Tax Proposals

Share buybacks will now be taxed as capital gains for all shareholders with an additional levy on promoters to curb misuse. This will result in an effective tax of 22% for corporate promoters and 30% for non-corporate promoters.  

TCS rates on alcoholic liquor, scrap, minerals and tendu leaves have been rationalised to 2%.  

To moderate derivatives trading, Securities Transaction Tax (STT) on futures has been increased from 0.02% to 0.05%, while STT on options premium and exercise has been raised to 0.15%. 

Also, from April 1, 2026, Minimum Alternate Tax (MAT) will become a final tax, with the rate reduced from 15% to 14%.

Union Budget 2026 combines growth-focused investments with inclusion, fiscal discipline and ease-of-living reforms. By strengthening domestic capabilities, expanding infrastructure, investing in people and simplifying taxes and trade, the Budget aims to provide a foundation for sustained growth and advance India’s journey towards Viksit Bharat.
 

*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.