Budget 2026 Highlights: Education Boost and Tax Changes

Introduction: Setting the Stage for FY27

Finance Minister Nirmala Sitharaman is set to present her ninth consecutive Union Budget on February 1, 2026, outlining the government's economic roadmap for the financial year 2026-27. This budget, the second full budget of the Modi 3.0 government, arrives amidst a backdrop of global economic uncertainty and geopolitical tensions. Expectations are centered on continued fiscal discipline, a sustained push for capital expenditure, and targeted measures to boost domestic manufacturing and job creation. The budget is expected to build upon the themes of previous years, focusing on long-term structural growth rather than short-term populist measures.

A Look Back: Key Announcements from Budget 2025

To understand the direction of the upcoming budget, it is useful to recall the key reforms introduced in the Union Budget for 2025-26. The previous budget provided significant relief to middle-class taxpayers under the new tax regime, making income up to ₹12 lakh per year effectively tax-free for many. For salaried individuals, a standard deduction of ₹75,000 pushed this limit even higher to ₹12.75 lakh. The government also rationalized tax slabs, simplified compliance by easing TDS and TCS rules, and introduced a new Income Tax Bill. On the manufacturing front, customs duties were reduced on several components for EVs, electronics, and life-saving drugs to encourage domestic production.

Core Focus Areas for Budget 2026

The upcoming budget is expected to maintain its focus on strengthening India's economic fundamentals. Key themes likely to dominate the announcements include a continued emphasis on infrastructure development, policies to enhance the ease of doing business, and initiatives aimed at job creation. The government's capital expenditure (capex) push is anticipated to continue, with an SBI report projecting that government-led capex could cross ₹12 lakh crore in FY27. This spending will likely be directed towards critical sectors like roads, railways, and defence to stimulate economic activity and create employment opportunities.

Spotlight on the Education Sector

Education is poised to be a major beneficiary in Budget 2026. The government aims to address the gap between high enrolment rates and learning outcomes, particularly at the secondary level. Key allocations are expected to support the expansion of medical education, with a goal of adding 75,000 new seats over the next five years. Furthermore, there will be a continued focus on strengthening the infrastructure of premier institutions like the Indian Institutes of Technology (IITs). The budget is also likely to include provisions for school retention programs and the establishment of new Atal Tinkering Labs to foster innovation from a young age.

Fiscal Prudence and the Economic Outlook

Maintaining fiscal discipline remains a central pillar of the government's economic strategy. The budget is expected to adhere to a path of gradual fiscal consolidation. The fiscal deficit for FY25 was pegged at 4.8% of GDP, with a target of 4.4% for FY26. Projections suggest a further reduction to around 4.2% in FY27. The government's medium-term goal is to bring the central government's debt-to-GDP ratio down from its current level of around 57% towards 50%. This disciplined approach is crucial for maintaining macroeconomic stability and attracting long-term investment.

Sector-Specific Expectations

Various sectors are anticipating targeted announcements to address specific challenges and opportunities. The budget is likely to include measures that support growth across different industries.

What Taxpayers Can Expect

Following the significant changes in the previous budget, individual taxpayers are watching closely for further refinements. With the new simplified Income Tax Act, 2025, set to be effective from April 1, 2026, the industry is seeking clarity on transition provisions. There is also an expectation that the government may introduce further incentives, such as an increase in the standard deduction, to encourage more taxpayers to shift to the new, exemption-free tax regime. Streamlining TDS categories and overhauling the customs duty framework to improve the ease of doing business are other key demands.

Conclusion: A Budget for Structured Growth

Union Budget 2026 is expected to be a statement of continuity and stability. The focus will likely remain on building long-term capacity through sustained capital expenditure in infrastructure, boosting domestic manufacturing, and making targeted investments in crucial sectors like education and healthcare. Rather than dramatic announcements, the budget is anticipated to deliver structured, incremental reforms aimed at strengthening India's economic resilience. For businesses and markets, the message is one of a steady, predictable policy environment designed to support sustainable growth in the years ahead.