Union Budget of India 2026

Introduction

The Union Budget of India 2026, the first budget created in the recently opened Kartavya Bhawan, was delivered to Parliament by the Union Minister of Finance and Corporate Affairs.

• The budget described as a Yuva Shakti-driven Budget, is based on the vision of Viksit Bharat and embodies the guiding values of Action over Ambivalence, Reform over Rhetoric, and People over Populism.
• Three Kartavyas (duties) that strive to ensure inclusive development, strengthen people’s capacities, and accelerate economic progress serve as the framework for the budget.

What are the Key Highlights of the Union Budget of India 2026?

First Kartavya: Accelerate & Sustain Economic Growth

• Manufacturing & Industry 
  • Biopharma SHAKTI
    • To position India as a worldwide hub, the Government proposed the “Biopharma SHAKTI” (Strategy for Healthcare Advancement through Knowledge, Technology and Innovation) initiative with an outlay of Rs 10,000 crore over five years to promote India as a global biopharma manufacturing centre.
    • It focuses on biologics and biosimilars, supported by 3 new National Institutes of Pharmaceutical Education and Research (NIPERs), upgradation of 7 existing institutes, and strengthening of CDSCO to worldwide standards.
  • India Semiconductor Mission 2.0
    • Building on ISM 1.0, the Union Budget 2026–27 launches India Semiconductor Mission (ISM) 2.0 to achieve technological sovereignty.
    • With industry-led R&D and training facilities, it focuses on producing semiconductor equipment and materials, bolstering robust supply networks, and developing a skilled labour force essential to both economic and national security.
  • Electronics Components Manufacturing: The Electronics Components Manufacturing Scheme expenditure is enhanced from Rs 22,919 crore to Rs 40,000 crore to strengthen domestic value chains and encourage electronics manufacturing.
  • Rare Earth Corridors & Chemical Parks: The Budget suggests three Chemical Parks under a cluster-based, plug-and-play approach to lessen reliance on imports, as well as Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu for the mining, processing, and production of Rare Earth Permanent Magnets (REPM).
  • Capital Goods & Container Manufacturing: To boost domestic capital goods and logistics production, the Budget announces a Construction and Infrastructure Equipment (CIE) Scheme, a Rs 10,000 crore Container production Scheme, and Hi-Tech Tool Rooms by Central Public Sector Enterprises (CPSEs).
  • Textile Sector Push: Mega Textile Parks and the National Fibre Scheme, Samarth 2.0, Tex-Eco Initiative, and cluster modernisation are introduced as part of an Integrated Textile Program to support technical textiles and value addition.
  • Gram Swaraj & Sports Goods: The Mahatma Gandhi Gram Swaraj effort intends to improve khadi, handloom, and handicrafts, while a sports goods manufacturing initiative tries to establish India as a global powerhouse for affordable, high-quality sports equipment.
• Infrastructure as “Growth Connectors
  • High-Speed Rail: Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri are the seven high-speed rail lines that will be built as “Growth Connectors” to promote economic activity.
  • Sustainable Movement of Cargo
    • To encourage environmentally friendly cargo transit, new Dedicated Freight Corridors will connect Dankuni to Surat, alongside the operationalisation of 20 National Waterways over the next five years.
    • By encouraging a transition from road and rail to waterways and coastal shipping, the Coastal Cargo Promotion Scheme will increase its share from 6% to 12% by 2047.
    • The Seaplane VGF Scheme would encourage indigenised seaplane manufacture and operations to improve last-mile connectivity and increase tourism.
  • Infrastructure Risk Guarantee Fund: An Infrastructure Risk Guarantee Fund was proposed in the budget to provide lenders with carefully calibrated partial credit guarantees during the infrastructure development and construction phase.
• City Economic Regions (CER)
  • A new project called “City Economic Regions” (CERs) was put out by the government to map cities according to certain growth drivers.
  • An allocation of Rs 5,000 crore each CER over 5 years is suggested to be administered via a “challenge mode.”
• Carbon Capture (CCUS): A carbon capture, utilisation, and storage program was introduced to decarbonise difficult-to-abate industries (such as steel and cement).

Second Kartavya: Fulfil Aspirations & Build Capacity

• AVGC Content Creator Labs: The government will assist the Indian Institute of Creative Technologies, Mumbai, in establishing “Animation, Visual Effects, Gaming and Comics (AVGC) Content Creator Labs” in 15,000 secondary schools and 500 colleges because it recognises the promise of the “Orange Economy”.
• National Institute of Hospitality: A proposal was presented to set up this institute by updating the existing National Council for Hotel Management and Catering Technology, bridging the gap between academia and the tourism industry.
• Khelo India Mission: Expanding upon the Khelo India initiative, the Budget establishes a Khelo India Mission to revolutionise the sports industry through competitive leagues, enhanced sports infrastructure, integrated talent development, coach capacity building, and sports science integration.
• Medical Value Tourism: With integrated amenities including AYUSH Centers, diagnostics, post-care, and rehabilitation services, the government suggested creating five Regional Medical Hubs in collaboration with the commercial sector to improve India’s standing as a wellness and medical tourism destination.
• Women in STEM: To support girls in STEM, one girls’ hostel will be created in every district through Viability Gap Funding (VGF) or capital support.

Third Kartavya: Sabka Saath, Sabka Vikas

• Bharat-VISTAAR:
  • The “Bharat-VISTAAR” (Virtually Integrated System to Access Agricultural Resources) technology will be introduced in an effort to transform agriculture.
  • This multilingual AI platform will integrate AgriStack and ICAR data to deliver tailored counsel to farmers.
• SHE Marts: Community-owned retail stores called “SHE Marts” (Self-Help Entrepreneur Marts) will be established within cluster federations, building on the success of the “Lakhpati Didis”.
• Mental Health Infrastructure: Reaffirming its commitment, the Government announced the setting up of “NIMHANS-2” and suggested upgrading institutes in Ranchi and Tezpur to “Regional Apex Institutions”.
• Divyangjan Support: Through programs like “Divyang Sahara Yojana” (implied in welfare focus), targeted efforts will be made to empower people with disabilities.

What are the Key Highlights of the Tax Reforms under the Union Budget of India 2026? 

• New Income Tax Act, 2025: With effect from April 1, 2026, the government replaces the current Income Tax Act, 1961 with a new, streamlined Income Tax Act, 2025.
• Tax Rates: No adjustments to the tax slabs for FY 2026-27; stability maintained.
• TCS Rationalisation: Under LRS, the Tax Collected at Source (TCS) on international travel packages and remittances for medical and educational purposes is lowered to a fixed 2% (with no threshold).
• Rationalisation of TDS
  • Tax Deduction at Source (TDS) on the provision of labour services is set at 1% (for individuals/HUF) or 2% (for others) to eliminate uncertainty.
  • Non-production of books of accounts and failure to pay TDS (when payment is made in kind) will be decriminalised.
• Customs Duty Rationalisation
  • For products imported for personal use, the tariff rate is lowered from 20% to 10%.
  • 17 cancer medications and foods for seven uncommon disorders are completely exempt from customs charges.
• Securities Transaction Tax (STT): Marginally increased (from 0.1% to 0.15% in certain parts) to limit excessive speculation in equity markets.
• Minimum Alternate Tax (MAT): The Union budget also proposes to offer exemption from Minimum Alternate Tax (MAT) to all non-residents who pay tax on a presumptive basis.
• Tax Administration: A Joint Committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes is proposed in the Budget to integrate the Income Computation and Disclosure Standards (ICDS) requirements into the Indian Accounting Standards (IndAS), do away with separate ICDS-based accounting for the 2027–2028 tax year, and simplify compliance by rationalizing the definition of accountant under the Safe Harbour Rules.
• Immunity from Prosecution: With effect from October 1, 2024, non-disclosure of foreign assets valued at less than Rs 20 lakh will be immune from prosecution.
• Buyback Tax Shift: Share buybacks will henceforth be taxed as Capital Gains in the hands of the shareholder (moving the burden from the firm to the recipient).

What are the Concerns Regarding the Union Budget of India 2026? 

• Global Headwinds: Geopolitical conflicts, trade disruptions, and a recession in the world economy might put the budget’s 10.0% nominal GDP growth (First Advance Estimates of FY 2025–2026) to the test.
• Revenue Buoyancy
  • Significant deficits in GST and income tax revenue drastically decreased fiscal flexibility, leading to cuts in all areas of spending, including capital projects and important social sectors.
  • In order to spur growth, the budget places a large wager on supply-side economics, which includes constructing industries, roads, and railroads. However, Private Consumption (which represents ~60% of GDP) has been constrained, especially in rural areas.
• Implementation Lag: High-technology schemes such as Bharat-VISTAAR and Biopharma SHAKTI require sophisticated institutional capabilities and often encounter regulatory and execution obstacles, while other infrastructure projects also continue to struggle with land acquisition issues.
• Job Creation Gap: With limited labour absorption and a growing education-employment skill mismatch, a capex-heavy strategy centred on semiconductors and biopharma runs the danger of unemployment or K-shaped growth.
• Green Transition and Resource Constraints: The shift to green technologies increases demand for water, energy, and essential minerals, rising import dependence and dangers of greenflation that may elevate costs for MSMEs and industry.
• Uncertain Capital Flows: Concerns about the stability of external financing and investor confidence are raised by persistent outflows of foreign portfolio investors (FPIs) and an ambiguous prognosis for foreign direct investment (FDI).
• External Aid Prioritisation Challenge: The Union Budget 2026–27 gives grants-in-aid to foreign nations, with Bhutan as the greatest beneficiary, while no funds for the strategically significant Chabahar Port project in Iran create concerns over India’s regional connectivity and strategic outreach.

What Measures can Strengthen India’s Economy Beyond Budget 2026? 

• Reviving the Twin Engines of Demand: Consumption and investment must work together for India to prosper. Due to a greater marginal propensity to consume, a quicker implementation of SHE Marts and Bharat-VISTAAR can increase rural earnings and stimulate demand.
• Securing Strategic Autonomy in Critical Resources (CNIED)
  • As vital minerals become the “new oil” of the green economy, India must combine local programs like Rare Earth Corridors with global mineral security relationships.
  • Simultaneously, expanding R&D spending above the existing low share of GDP is important to support semiconductors and biopharma sectors.
• Skilling for New Sectors: The AVGC and Semiconductor push must be paired with aggressive skill development (Skill India 2.0) to prevent a talent crunch.
• Quality of Expenditure: Change “Outlays” to “Outcomes.” Every Rupee spent on projects like Mahatma Gandhi Gram Swaraj must be audited for tangible asset creation and income production, not just budget usage.
• Correcting “Inverted Duty Structures”: In areas like textiles and electronics, inverted duty regimes (where raw materials are taxed more than completed imports) damage indigenous manufacturers.

Conclusion

The Union Budget of India 2026 carefully balances fiscal restraint with an ambitious push for high-tech industrialisation and inclusive welfare, building a robust foundation for a “Viksit Bharat.” However, its final success will depend on the effective implementation of plans to bridge the “Jobless Growth” gap and the restoration of private consumption to ensure economic momentum reaches the “Last Mile.”

Frequently Asked Questions (FAQs)

Sources:

• https://www.indiabudget.gov.in/
• https://www.pib.gov.in/PressReleasePage.aspx?PRID=2221458&reg=3&lang=2
• https://en.wikipedia.org/wiki/Union_budget_of_India
• https://timesofindia.indiatimes.com/business/india-business/union-budget-2026-live-updates-key-highlights-income-tax-railways-defence-fm-nirmala-sitharaman-speech-announcements-india-budget-2026/liveblog/127830282.cms
• https://www.thehindu.com/business/budget/union-budget-2026-explained-revenue-source/article70577799.ece