KEY HIGHLIGHTS OF UNION BUDGET 2026-27

PART-A

Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman tabled the Union Budget 2026-27 in the parliament today. Some of the key highlights of the Budget are as follows:

SCALING UP MANUFACTURING IN 7 STRATEGIC AND FRONTIER SECTORS

i. Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology and Innovation) announced, with an outlay of ₹ 10,000 crores over the next 5 years to develop India as a global Biopharma manufacturing hub.

a. A Biopharma-focused network to be created with 3 new National Institutes of Pharmaceutical Education and Research (NIPER) and upgrading 7 existing ones.

b. A network of over 1000 accredited India Clinical Trials sites to be created

ii. India Semiconductor Mission (ISM) 2.0 to be launched to produce equipment and materials, design full-stack Indian IP, and fortify supply chains with focus on industry led research and training centres to develop technology and skilled workforce.

iii. The Electronics Components Manufacturing Scheme outlay increased to ₹40,000 crore. 

iv. Dedicated Rare Earth Corridors to be established, to support the mineral-rich States of Odisha, Kerala, Andhra Pradesh and Tamil Nadu to promote mining, processing, research and manufacturing. 

v. Government to launch a Scheme to support States in establishing 3 dedicated Chemical Parks, through challenge route, on a cluster-based plug-and-play model.

vi. Strengthening Capital Goods Capability 

* Hi-Tech Tool Rooms to be established by CPSEs at 2 locations as digitally enabled automated service bureaus that locally design, test, and manufacture high-precision components at scale and at lower cost.

* A Scheme for Enhancement of Construction and Infrastructure Equipment (CIE) to be introduced, to strengthen domestic manufacturing of high-value and technologically-advanced CIE.

* A Scheme for Container Manufacturing announced, to create a globally competitive container manufacturing ecosystem, with a budgetary allocation of over ₹10,000 crore over a 5 year period. 

vii. Integrated Programme for the Textile Sector announced 

a. The National Fibre Scheme for self-reliance in natural fibres such as silk, wool and jute, man-made fibres, and new-age fibres. 

b. Textile Expansion and Employment Scheme to modernize traditional clusters with capital support for machinery, technology upgradation and common testing and certification centres. 

* Mega Textile Parks to be setup in challenge mode with focus on bringing value addition to technical textiles.

* Mahatma Gandhi Gram Swaraj initiative announced, to strengthen khadi, handloom and handicrafts.

a. Initiative to help in global market linkage, branding and will streamline and support training, skilling, quality of process and production. 

REJUVENATING LEGACY INDUSTRIAL SECTORS

* A Scheme to revive 200 legacy industrial clusters announced, to improve their cost competitiveness and efficiency through infrastructure and technology upgradation. 

CREATING “CHAMPION SMES” AND SUPPORTING MICRO ENTERPRISES 

* A dedicated ₹10,000 crore SME Growth Fund, to be introduced, to create future Champions, incentivizing enterprises based on select criteria.

* Self-Reliant India Fund to be allocated with additional ₹2,000 crore, to continue support to micro enterprises and maintain their access to risk capital.

* Government to facilitate Professional Institutions such as ICAI, ICSI, ICMAI to design short-term, modular courses and practical tools to develop a cadre of ‘Corporate Mitras’, especially in Tier-II and Tier-III towns.

DELIVERING A POWERFUL PUSH TO INFRASTRUCTURE 

* Public capital expenditure to be increased to ₹12.2 lakh crore in FY 2026-27.

* Government to set up an Infrastructure Risk Guarantee Fund to strengthen the confidence of private developers regarding risks during infrastructure development and construction phase.

* Government to accelerate recycling of significant real estate assets of CPSEs through the setting up of dedicated REITs.

* To promote environmentally sustainable movement of cargo, following measures are proposed: 

a. New Dedicated Freight Corridors to be established connecting Dankuni in the East, to Surat in the West

b. 20 new National Waterways (NW) to be operationalised  over next 5 years, starting with NW-5 in Odisha to connect mineral rich areas of Talcher and Angul and industrial centres like Kalinga Nagar to the Ports of Paradip and Dhamra.

*Training Institutes to be set up as Regional Centres of Excellence for development of the required manpower.

* Further, a ship repair ecosystem catering to inland waterways to be set up at Varanasi and Patna

c. A  Coastal Cargo Promotion Scheme to be launched for incentivising a modal shift from rail and road, to increase the share of inland waterways and coastal shipping from 6% to 12 % by 2047.

*Incentives to be provided to indigenize manufacturing of seaplanes and enhance last-mile and remote connectivity, and promote tourism.

a. Seaplane VGF Scheme to be introduced to provide support for operations.

ENSURING LONG TERM ENERGY SECURITY AND STABILITY

* An outlay of ₹20,000 crore over the next 5 years, announced for Carbon Capture Utilization and Storage (CCUS) technologies.
DEVELOPING CITY ECONOMIC REGIONS

 

* An allocation of ₹5000 crore over 5 years, per city economic regions (CER) announced, for implementing their plans through a challenge mode with a reform-cum-results based financing mechanism.

 

* Government to develop Seven High-Speed Rail corridors between cities as ‘growth connectors’ to promote environmentally sustainable passenger systems. These include:

i.   Mumbai-Pune

ii.  Pune-Hyderabad

iii. Hyderabad-Bengaluru

iv. Hyderabad-Chennai

v.  Chennai-Bengaluru

vi. Delhi-Varanasi

vii. Varanasi-Siliguri 

EDUCATION

* 5 University Townships to be created in the vicinity of major industrial and logistic corridors through challenge route.

FOCUS ON THE PURVODAYA STATES AND THE NORTH-EASTERN REGION

* Government to develop an integrated East Coast Industrial Corridor with a well-connected node at Durgapur.

PART –B

* DIRECT TAXES

New Income Tax Act

* New Income tax Act, 2025 to come into effect from April 2026

* The simplified Income Tax Rules and Forms will be notified shortly. The forms redesigned for easy compliance of ordinary citizens.   
Ease of Living

 

* Simplified TDS provisions for manpower supply will benefit labour intensive business.

 

* Scheme for small taxpayers wherein a rule based automated process for obtaining Lower or nil deduction certificate instead of filing application with the assessor.

* Single window filing with depositories for Form 15G or 15 H for TDS on dividends, interests etc.

* Extend time available for revising returns from 31st December to upto 31st March with payment of nominal fees

* The timeline for filing of tax returns to be staggered.

* TAN for property transactions involving NRIs will be replaced with resident buyers PAN based challan.

* A one-time 6 month foreign asset disclosure scheme for small taxpayers to disclose their overseas income or asset.

Rationalizing Penalty and Prosecution

* IT assessment & penalty proceedings are proposed to be integrated by way of common order for both.

* Taxpayers allowed to update their returns even after reassessment proceedings have been initiated to reduce litigations, at an additional 10 percent tax rate over and above the rate applicable for the relevant year.

* Penalty for misreporting of income also eligible for immunity with payment of additional income tax.

* Prosecution framework under the Income Tax Act to be rationalized.

* Non-production of books of account and documents, and requirement of TDS payment, where payment is made in kind, to be decriminalised.

* Non-disclosure of non-immovable foreign assets with aggregate value less than 20 lakh rupees to be provided with immunity from prosecution with retrospective effect from 1.10.2024.

Supporting IT sector as India’s growth engine

* Software development services, IT enabled services, knowledge process outsourcing services and contract R&D services relating to software development to be clubbed under a single category of Information Technology Services with a common safe harbour margin of 15.5 percent.

* The threshold for availing safe harbour for IT services to be enhanced from 300 crore rupees to 2,000 crore rupees.

* Safe harbour for IT services shall be approved by an automated rule-driven process, can be continued for a period of 5 years at a stretch.

* Unilateral Advanced Pricing Agreement (APA) process for IT services to be fast-tracked with the endeavour to conclude it within a period of 2 years, which can be extended by 6 months on taxpayer’s request.

*The facility of modified returns available to the entity entering APA to be extended to its associated entities. 

Attracting global business and investment

* Any foreign company that provides cloud services to customers globally by using data centre services from India to be provided Tax holiday till 2047

* A safe harbour of 15 percent on cost to be provided if the company providing data centre services from India is a related entity.

* A safe harbour to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value. The resultant tax of about 0.7 percent will be much lower than in competing jurisdictions.

* Exemption from income tax for 5 years to be provided to any non-resident who provides capital goods, equipment or tooling, to any toll manufacturer in a bonded zone.

* Exemption to global (non-India sourced) income of a non-resident expert, for a stay period of 5 years under notified schemes

* Exemption from Minimum Alternate Tax (MAT) to all non-residents who pay tax on presumptive basis. 

Tax administration

* A Joint Committee of Ministry of Corporate Affairs and Central Board of Direct Taxes to be constituted for incorporating the requirements of Income Computation and Disclosure Standards (ICDS) in the Indian Accounting Standards (IndAS) itself. Separate accounting requirement based on ICDS will be done away with from the tax year 2027-28.

* Definition of accountant for the purposes of Safe Harbour Rules to be rationalized. 

Other Tax proposals

* In the interest of minority shareholders, buyback for all types of shareholders to be taxed as Capital Gains. Promoters to pay an additional buyback tax, making effective tax 22 percent for corporate promoters and 30 percent for non-corporate promoters.

* TCS rate for sellers of specific goods namely alcoholic liquor, scrap and minerals will be rationalized to 2 percent and that on tendu leaves will be reduced from 5 percent to 2 percent.

* STT on Futures to be raised to 0.05 percent from present 0.02 percent. STT on options premium and exercise of options to be raised to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively.

* To encourage companies to shift to the new regime, set-off of brought forward MAT credit to be allowed to companies only in the new regime. Set-off using available MAT credit to be allowed to an extent of 1/4th of the tax liability in the new regime.

* MAT is proposed to be made final tax. There will be no further credit accumulation from 1st April 2026. The rate of final tax to be reduced to 14 percent from the current MAT rate of 15 percent. The brought forward MAT credit of taxpayers accumulated till 31st March 2026, will continue to be available to them for set-off as above. 

INDIRECT TAXES

Tariff Simplification Marine, leather, and textile products

* The limit for duty-free imports of specified inputs used for processing seafood products for export, to increase from the current 1 per cent to 3 per cent of the FOB value.

* The duty-free imports of specified inputs, which is currently available for exports of leather or synthetic footwear to be allowed.
Energy transition and security

 

* The basic Customs duty exemption given to capital goods used for manufacturing Lithium-Ion Cells for batteries to be extended.

 

* The basic Customs duty on import of sodium antimonate for use in manufacture of solar glass to be exempted.

Nuclear Power

* The existing basic Customs duty exemption on imports of goods required for Nuclear Power Projects to be extended till the year 2035. 

Critical Minerals

* The basic Customs duty to the import of capital goods required for processing of critical minerals to be exempted. 

Civil and Defence Aviation

* The basic Customs duty on components and parts required for the manufacture of civilian, training and other aircrafts to be exempted.

* The basic Custom duty on raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or overhaul requirements by Units in the Defence sector to be exempted.

Electronics

* The basic Customs duty on specified parts used in the manufacture of microwave ovens to be exempted. 

Special Economic Zone

* A special one-time measure, to facilitate sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) at concessional rates of duty is proposed. The quantity of such sales will be limited to a prescribed proportion of their exports.

Ease of Living

* The tariff rate on all dutiable goods imported for personal use to be reduced from 20 per cent to 10 per cent.

* The basic Customs duty on 17 drugs/ medicines is to be exempted.

* Duty free personal import of drugs/ medicines and food for 7 more rare diseases. 

Customs Process simplification

* Custom processes to have minimal intervention for smoother and faster movement of goods. 

Trust-based systems

* Duty deferral period for Tier 2 and Tier 3 Authorised Economic Operators, known as AEOs, to be enhanced from 15 days to 30 days. Same is extended to the eligible manufacturer-importers

* Validity period of advance ruling, binding on Customs, to be extended from the present 3 years to 5 years.

* Government agencies will be encouraged to leverage AEO accreditation for preferential treatment in clearing their cargo.

* Filing of bill of entry by a trusted importer, and arrival of goods will automatically notify Customs for completing their clearance formalities (for import of goods not needing any compliance).

* The Customs warehousing framework to be transformed into a warehouse operator-centric system with self-declarations, electronic tracking and risk-based audit.

Ease of Doing Business

* Cargo clearance approvals from various Government agencies to be seamlessly processed through a single and interconnected digital window by the end of the financial year.

*Processes involved in clearance of food, drugs, plant, animal & wild life products, accounting for around 70 percent of interdicted cargo, to be operationalised on this system by April 2026 itself.

* For goods not having any compliance requirement, clearance to be done by Customs immediately after online registration is completed by the importer.

* Customs Integrated System (CIS) to be rolled out in 2 years as a single, integrated and scalable platform for all the customs processes.

* Utilization of non-intrusive scanning with advanced imaging and AI technology for risk assessment to be expanded in a phased manner with the objective to scan every container across all the major ports.

New export opportunities

* Fish catch by an Indian fishing vessel in Exclusive Economic Zone (EEZ) or on the High Seas to be made free of duty, landing of such fish on foreign port will be treated as export of goods.

* Complete removal of the current value cap of ₹10 lakh per consignment on courier exports-supports aspirations of India’s small businesses, artisans and start-ups to access global markets through e-commerce

Ease of Living

* Provisions governing baggage clearance to be revised during international travel. Revised rules to enhance duty-free allowances in line with the present day travel realities.

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