On February 1, 2026, Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27 in Parliament, her ninth consecutive Budget, making her one of India’s longest-serving finance ministers.
The Budget arrives at a moment shaped by steady domestic growth, global uncertainty, and a growing need for stability, clarity, and long-term direction for businesses and individuals alike. As a result, the government has focused less on short-term relief and more on building strong foundations through infrastructure, manufacturing, simpler compliance, and long-term competitiveness.
This is not a headline-grabbing Budget. It is a steady, structural one. Below are the highlights shaping India’s financial and economic landscape in the year ahead.
Key Takeaways
- Budget 2026–27 prioritises steady, long-term growth over short-term relief, with a clear focus on infrastructure, manufacturing, and fiscal discipline under the Viksit Bharat 2047 vision.
- Tax policy avoids surprises, emphasising stability, predictability, and simpler administration through the upcoming Income Tax Act, 2025, and process-led GST reforms.
- GST changes focus on systems rather than rates, aiming to improve refund timelines, valuation clarity, and dispute reduction, especially benefiting MSMEs and exporters.
- MSMEs and exporters see targeted liquidity support through faster GST refunds, strengthened Trade Receivables Discounting System (TReDS) mechanisms, and dedicated growth and credit funds.
- Manufacturing and strategic sectors receive sustained support, including biopharma, critical minerals, electronics, clean energy, and defence, backed by skills and supply-chain development.
- Overall compliance friction is reduced, with clearer rules, faster processes, and a shift toward facilitative, technology-driven governance.
The three Kartavyas guiding Budget 2026–27
At its core, the Union Budget 2026–27 is built around three clear kartavyas (duties) that define the government’s economic direction for the years ahead.
| Kartavya | What it means | How it shows up in Budget 2026–27 |
| 1. Accelerate and sustain economic growth | Improve productivity, competitiveness, and resilience amid global uncertainty | Record capital expenditure, infrastructure-led growth, manufacturing and export-focused policies |
| 2. Build capacity and fulfil aspirations | Enable people, enterprises, and institutions to actively participate in India’s growth journey | Support for MSMEs, skilling initiatives, easier access to capital, and simplified compliance frameworks |
| 3. Ensure inclusive participation | Extend growth benefits across sectors, regions, and communities | Regional development programs, support for agriculture, healthcare, education, and employment generation |
Together, these kartavyas reflect a deliberate shift toward steady execution backed by structural reforms, a resilient financial system, and the increasing use of technology, including AI-driven applications across governance and industry.
The Big Picture: Growth With Discipline
The government continues to balance growth ambitions with fiscal responsibility. While public investment remains strong, there is a clear commitment to consolidation and predictability.
Key fiscal indicators
| Metric | Budget 2026–27 snapshot |
| Capital expenditure | ₹12.2 lakh crore (highest ever) |
| Fiscal deficit | 4.4% of GDP (FY25–26 RE), 4.3% (FY26–27 BE) |
| Debt trajectory | Gradual reduction toward medium-term targets |
In line with this approach, the government accepted the 16th Finance Commission’s recommendation to retain 41% vertical devolution, alongside grants of approximately ₹1.4 lakh crore to states. This strengthens cooperative federalism while ensuring states have the fiscal capacity to support local development.
The underlying message is consistent: increased public investment will encourage private sector investment, create jobs, and improve productivity without destabilising public finances. These measures support the government’s vision of making India a developed nation by 2047 (Viksit Bharat 2047).
Taxation: No Shocks, More Simplicity
Budget 2026–27 avoids headline tax changes and instead focuses on predictability, simplification, and smoother administration. The intent is clear: reduce friction, improve cash flow, and give businesses and individuals greater certainty.
Direct Taxes: Stability with Structural Reform
There are no changes to income tax slabs this year. Instead, the government has announced a major structural reform through the new Income Tax Act, 2025, which will come into effect from April 1, 2026.
The new framework aims to:
- Simplify direct tax laws by reducing complexity and duplication
- Improve readability and interpretation
- Make compliance easier for individuals and businesses
Key direct tax measures include:
- Extended timelines for filing revised returns, with a nominal fee
- Staggered ITR filing deadlines:
- Individuals (ITR-1, ITR-2): up to July 31
- Non-audit businesses and trusts: up to August 31
- Permission to file updated returns even when cases are under appeal before the first appellate authority
- Clearer tax treatment for share buybacks, now taxed as capital gains for all shareholders
- Incremental simplification of corporate taxation, including rationalisation around MAT-related provisions
The broader message is one of continuity and confidence, allowing long-term financial planning without fear of sudden tax changes.
GST: Better Systems, Not Rate Changes
GST rates remain unchanged. The focus is on improving how the system works on the ground.
Key GST and indirect tax process improvements include:
- Faster and simpler refund mechanisms, especially for exporters
- Removal of thresholds that delayed export refunds
- Clearer rules on valuation, post-sale discounts, and place of supply for services
These measures improve cash flow, reduce disputes, and ease compliance, particularly for MSMEs and export-oriented businesses.
Customs, Tariffs, and Global Trade Alignment
In response to global trade pressures and supply chain shifts, the Budget introduces tariff rationalisation to improve competitiveness and affordability.
Key customs and tariff changes:
- Import duty on all dutiable goods for personal use reduced from 20% to 10%
- Exemption from customs duty on imported raw materials used for MRO services
- Customs duty exemption on 17 cancer-related drugs, improving access to critical medicines
- Basic Customs Duty exemption on specified parts used in microwave oven manufacturing
These changes support domestic manufacturing, healthcare affordability, and global trade integration.
Relief on Foreign Travel, Education, and Services
The Budget also reduces upfront tax burdens on individuals and businesses through targeted TCS and TDS reforms.
Notable relief measures include:
- TCS on overseas tour packages reduced to a flat 2% (from earlier 5% and 20%)
- Removal of the minimum threshold for TCS on foreign travel
- Under the Liberalised Remittance Scheme (LRS), TCS for education and medical treatment abroad has been reduced from 5% to 2%
- Manpower services to be treated as contractor payments, attracting a lower TDS of 1% or 2%, reducing ambiguity for businesses
Capital Markets: Targeted Adjustments
- Share buybacks to be taxed as capital gains across all shareholder categories
- Securities Transaction Tax (STT) on futures increased from 0.02% to 0.05%
These changes aim to improve clarity and align tax treatment across market instruments.
At a Glance: What Changed for Whom
| Audience | What changes in Budget 2026–27 |
| Individuals | Lower TCS on foreign travel, education, and medical expenses; simpler income tax framework from 2026; easier ITR filing timelines |
| Businesses | Stable tax regime, clearer GST rules, faster refunds, simplified buyback taxation, tariff rationalisation, and lower compliance friction |
| MSMEs & exporters | Faster GST refunds, improved liquidity, better access to credit, and reduced working capital stress |
Financial System Reforms and Market Deepening
Several announcements reflect a quieter but important effort to strengthen India’s financial plumbing. The focus is on improving liquidity, diversifying funding sources, and reducing over-reliance on bank credit, in line with the broader Viksit Bharat vision.
Financial markets and institutional reforms
| Area | Budget 2026–27 announcement |
| Banking system | High-level committee to review the future of banking, focusing on governance, credit delivery, and resilience |
| NBFC restructuring | Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to be restructured |
| Corporate bond markets | ₹100 crore support for single bond issuances above ₹1,000 crore |
| Market liquidity | Market-making framework to improve corporate bond liquidity |
| Investor base expansion | Indian residents living abroad are allowed to invest in Indian equities |
| Fiscal support | Higher dividend inflows expected from PSBs and the RBI |
Debt, fiscal discipline, and government borrowing
- Debt-to-GDP ratio targeted at 55.6% in FY 2026–27, down from 56.11% (RE FY 2025–26)
- Fiscal deficit estimated at 4.4% (RE FY 2025–26) and budgeted at 4.3% for FY 2026–27
- Gross market borrowing of ₹11.7 lakh crore planned through dated securities
- Lower debt levels are expected to reduce interest payments and free up fiscal space over time
Capex and long-term capacity building
- Capital expenditure increased to ₹12.2 lakh crore, up from ₹11.2 lakh crore in the previous year.
- Continued focus on infrastructure, logistics, and manufacturing-led growth.
- Proposal to set up a new national institution to support domestic manufacturing capabilities.
- The Budget suggests supporting professional bodies like ICAI and ICSI in launching short-term, modular, and industry-aligned courses.
MSMEs: Improving Liquidity and Ease of Doing Business
MSMEs remain central to India’s employment and exports story. In Budget 2026–27, the focus is firmly on addressing their most persistent challenge: cash flow predictability.
Recognising MSMEs as the backbone of the economy, the government announced a set of targeted measures aimed at improving access to capital, reducing payment delays, and easing financial stress across the sector.
| Measure | What it means for MSMEs |
| ₹10,000 crore SME Growth Fund | Capital support for expansion, innovation, and scale |
| ₹2,000 crore liquidity support for micro enterprises | Improved working capital availability at the smallest end of the spectrum |
| Strengthening of the TReDS platform | Faster invoice discounting and quicker payments from large buyers |
| Stronger digital financing platforms | Shorter cash cycles and reduced reliance on informal credit |
The intent is clear: ease credit access, shorten payment cycles, and help small businesses operate and scale with confidence without getting caught in cash flow bottlenecks.
Manufacturing and Production: Building Strategic Capacity
Budget 2026–27 reinforces India’s push to become a global manufacturing hub by focusing on end-to-end ecosystem development rather than standalone incentives. The emphasis is on strengthening supply chains, building skills, and supporting sectors critical to long-term competitiveness and self-reliance.
| Priority sector | Budget 2026–27 focus |
| Semiconductors & electronics | Continued policy and capital support to strengthen domestic manufacturing and global supply chain participation |
| Biopharma & pharmaceuticals | ₹10,000 crore outlay over five years to position India as a global pharma manufacturing and innovation hub |
| Rare earths & critical minerals | Dedicated corridors to support exploration, processing, and domestic value addition, reducing import dependence |
| Battery storage & clean energy | Support for battery manufacturing and clean energy components aligned with energy transition goals |
| Defence & advanced manufacturing | Push for indigenous production, technology partnerships, and export growth |
| Textiles & skilling | New skilling and training initiatives to boost employment and global competitiveness |
By combining capital support, policy clarity, and workforce development, the Budget aims to reduce import dependence and build resilient, globally competitive manufacturing ecosystems.
Infrastructure: Still the Strongest Growth Lever
Infrastructure continues to be the backbone of India’s growth strategy. Sustained capital allocation aims to lower logistics costs, improve connectivity, and unlock regional economic potential.
Key focus areas include:
- Expansion of national highways and rail corridors
- High-speed rail and multimodal transport corridors
- Operationalisation of new national waterways for greener freight movement
- Development of City Economic Regions to strengthen Tier-two and Tier-three growth hubs
For businesses, this translates into smoother supply chains, faster movement of goods, and improved access to domestic and global markets.
Agriculture: Technology Meets Income Diversification
Agriculture policy in Budget 2026 moves beyond price support and procurement. The launch of Bharat-VISTAAR, an AI-driven, multilingual digital platform, aims to provide farmers with integrated advisory services on weather, crops, and best practices.
In parallel, support has been announced for high-value crops such as coconut, cashew, sandalwood, walnuts, almonds, and pine nuts, helping farmers diversify income and reduce volatility.
Education, Healthcare, and Skills: Investing in People
Beyond physical infrastructure, the Budget places strong emphasis on human capital.
Key initiatives include:
- Expansion of healthcare infrastructure, including regional medical hubs
- Increased focus on mental health, with a new NIMHANS-2 institute and upgraded trauma care facilities at district hospitals
- Skill development programs aligned with manufacturing, digital services, and creative industries
- Stronger industry–academia collaboration to improve employability
These investments support long-term productivity and inclusive growth.
Sustainability, Tourism, and Regional Balance
Sustainability and inclusion continue to be integrated into mainstream economic policy rather than treated as standalone themes.
Highlights include:
- Support for clean energy and green manufacturing
- Programs encouraging women-led enterprises and community-based commerce
- Tourism, culture, and heritage initiatives to drive local employment
A focused push for eastern and north-eastern states under the Purvodaya initiative reinforces the government’s intent to balance regional development alongside national growth.
Note: For a full official summary of the Union Budget 2026–27 as presented in Parliament, you can refer to the Government’s press release on the Press Information Bureau(PIB) website.
GST & Business Compliance: What to Watch Next
While Budget 2026–27 focused on improving GST systems rather than changing rates, it also sets the stage for deeper compliance reforms ahead.
Key areas businesses should watch closely include:
- Simpler valuation for post-sale discounts, removing rigid pre-agreement and invoice-linking requirements, and aligning GST rules with commercial realities.
- Expanded refund access, including removal of minimum thresholds for export refunds and the likely introduction of provisional refunds for inverted duty cases, easing working capital pressure, especially for MSMEs and exporters.
- Clearer place-of-supply rules for services, particularly intermediary services, which could significantly reduce litigation in cross-border transactions.
- Faster dispute resolution, with interim appellate mechanisms and streamlined appeal processes aimed at reducing legacy disputes and compliance uncertainty.
Taken together, these measures signal a shift toward GST as a facilitative system focused on predictability, liquidity, and lower friction rather than enforcement-first compliance.
Also Read: GST Calendar 2026
What This Budget Means for You
- For individuals: Fewer surprises, simpler compliance, and a stable tax environment
- For businesses: Strong infrastructure support, clearer tax rules, and policy continuity
- For MSMEs and exporters: Better cash flow, faster refunds, and reduced compliance friction
- For the economy: A steady push toward resilience, competitiveness, and long-term growth
A Note for Businesses Managing Money Day to Day
As Budget 2026–27 puts the spotlight on infrastructure, MSMEs, and simpler compliance, one theme stands out clearly: how efficiently businesses manage cash flow will matter as much as access to capital.
Faster refunds, shorter payment cycles, and clearer tax rules are only effective when businesses have visibility and control over their money in real time. This is where modern, connected financial systems become essential, helping finance teams track balances, manage payouts, stay compliant, and move faster without adding operational complexity.
At OPEN, we see this shift play out every day. As policies move toward simplification and predictability, businesses need tools that help them turn intent into execution with better visibility, smoother payouts, and fewer manual workarounds.
Budget 2026–27 reinforces a simple truth: when systems work better, businesses grow with confidence. And the next phase of India’s growth will belong to those who are ready to operate with speed, clarity, and control.
Final Thoughts
Union Budget 2026-27 is not about quick wins or dramatic announcements. It is about steady execution. By prioritising infrastructure, simplifying systems, and strengthening productive capacity, the government is laying the groundwork for sustainable growth.
For businesses and individuals alike, the takeaway is reassurance. The direction is consistent, the rules are clearer, and the focus remains on making it easier to build, operate, and grow in India.
That, in many ways, is the real headline of Budget 2026-27.
