NEW DELHI — In a landmark session held at the newly named Kartavya Bhawan, Finance Minister Nirmala Sitharaman unveiled a ₹53.5 lakh crore Union Budget for the fiscal year 2026–27. With a core focus on “Yuva Shakti”, Agriculture, and MSMEs, the Budget balances a record ₹12.2 lakh crore capital expenditure target with a commitment to fiscal prudence, narrowing the fiscal deficit to 4.3% of GDP.
1. Personal Finance & Income Tax: Stability Meets Simplification
While the basic income tax slabs remain unchanged from the significant reforms of 2025, the 2026 Budget introduces the Income Tax Act, 2025, effective April 1, 2026, aimed at reducing litigation and easing compliance.
Key Direct Tax Highlights:
- Income Tax Slabs: No changes to rates. In the New Tax Regime, income up to ₹12 lakh remains effectively tax-free due to the ₹60,000 rebate under Section 87A.
- TCS Relief: Tax Collected at Source (TCS) on overseas tour packages, education, and medical remittances under LRS has been slashed from 5% / 20% to 2%.
- Revised Return Deadline: Taxpayers now have until March 31 (previously Dec 31) to file revised returns, subject to a nominal fee.
- STT Hike: To discourage speculative trading, the Securities Transaction Tax (STT) on Futures rises to 0.05% and on Options to 0.15%.
- Motor Accident Claims: Interest on compensation awarded by the Motor Accident Claims Tribunal is now fully exempt from tax.
2. Sector-Wise Allocations: Driving the “Reform Express”
The transport and defence sectors continue to be the primary engines of government spending, together accounting for nearly ₹12 lakh crore.
| Sector | Allocation (₹ Crore) | Key Initiatives |
| Transport | 5,98,520 | 7 high-speed passenger rail corridors; 20 new national waterways. |
| Defence | 5,94,585 | 22% hike in capex; focus on aircraft manufacturing & local production. |
| Railways | 2,77,830 | Record capex for new lines and rolling stock; East-West freight corridor. |
| Rural Dev. | 2,73,108 | Diversification into high-value agriculture and fisheries. |
| Home Affairs | 2,55,234 | Modernization of CAPFs; focus on border infrastructure & internal security. |
| Agriculture | 1,62,671 | Focus on livestock, rare earth corridors for agro-processing. |
3. Strategic Industrial & Healthcare Pushes
- Rare Earth Corridors: Dedicated zones in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to establish India as a hub for critical mineral processing.
- MSME Growth Fund: A ₹10,000 crore fund to scale small businesses into “Champion MSMEs.”
- Biopharma Shakti: A ₹10,000 crore outlay to boost domestic production of biologics and biosimilars.
- NIMHANS 2.0: A massive expansion of mental health infrastructure, including the training of 1.5 lakh caregivers.
4. “Where the Money Goes” (Budget Expenditure Profile)
The Budget’s expenditure is heavily weighted toward long-term asset creation:
- States’ Share of Taxes: 22%
- Interest Payments: 20%
- Central Sector Schemes: 17%
- Defence: 11%