Union Budget 2026 Highlights: Capex Boost, New Schemes & Tax Changes

Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2026-27 on February 1, 2026, marking her ninth consecutive budget. The speech outlined the government's economic roadmap, emphasizing sustained capital expenditure, structural reforms, and inclusive growth, all aligned with the long-term vision of 'Viksit Bharat' (Developed India) by 2047. The budget is structured around three core principles or 'kartavyas': accelerating economic growth, fulfilling citizen aspirations, and ensuring equitable access to resources.

Fiscal Roadmap and Key Numbers

The government reaffirmed its commitment to fiscal consolidation while continuing to push for growth through public investment. The capital expenditure (capex) target for FY27 has been increased to ₹12.2 lakh crore, a significant step up from the ₹11.2 lakh crore allocated for the current fiscal year. This sustained focus on infrastructure is intended to boost private investment and job creation.

The fiscal deficit is projected to narrow to 4.3% of GDP in FY 2026-27, down from the 4.4% estimated for FY26. The total expenditure for the upcoming financial year is pegged at ₹53.5 lakh crore, with net tax receipts estimated at ₹28.7 lakh crore. The Centre will provide ₹1.4 lakh crore to states as tax devolution.

A Strong Push for Manufacturing and Industry

A central theme of Budget 2026 is the drive to enhance domestic manufacturing capabilities across several strategic sectors. The India Semiconductor Mission 2.0 received a major boost, with its outlay increased to ₹40,000 crore to foster industry-led research and training. To reduce import dependency on critical minerals, dedicated rare earth corridors will be established in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.

Further, the 'Biopharma SHAKTI' initiative was launched with an outlay of ₹10,000 crore over five years to strengthen the domestic biopharmaceutical industry. The budget also announced the establishment of three dedicated chemical parks in every state through a challenge-based model to bolster domestic production. Schemes for promoting container manufacturing and high-tech construction equipment were also introduced.

Support for MSMEs and Traditional Sectors

The budget includes several measures to support Micro, Small, and Medium Enterprises (MSMEs). A ₹10,000 crore SME Growth Fund was announced to provide equity support to promising enterprises. The Self-Reliant India Fund will be topped up with an additional ₹2,000 crore to support micro-enterprises. To improve liquidity, the Trade Receivables Discounting System (TReDS) will be mandated as the settlement platform for all purchases from MSMEs by Central Public Sector Enterprises (CPSEs).

The labour-intensive textile sector received significant attention with proposals for mega textile parks, a National Fibre Scheme for self-sufficiency, and the Mahatma Gandhi Gram Swaraj initiative to support khadi and handicrafts businesses.

Infrastructure and Connectivity Overhaul

Infrastructure development remains a key priority. The Finance Minister announced the development of seven high-speed rail corridors to serve as 'growth connectors' between major cities, including Mumbai-Pune, Pune-Hyderabad, and Delhi-Varanasi. A new dedicated east-west freight corridor connecting Dankuni to Surat was also proposed to improve logistics efficiency.

To de-risk infrastructure projects and encourage private participation, the government will set up an Infrastructure Risk Guarantee Fund. The budget also aims to accelerate asset monetisation by recycling real estate assets of CPSEs through dedicated Infrastructure Investment Trusts (InvITs).

Financial Sector and Taxation Reforms

Several reforms were announced for the financial sector. A high-level committee will be established to comprehensively review the banking sector and align it with the goals of 'Viksit Bharat'. Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) are set to be restructured to improve efficiency. To deepen capital markets, the budget introduced a market-making framework for corporate bonds and a new route for foreign individuals to invest in Indian equities.

On the taxation front, the new Income Tax Act, 2025, will come into effect from April 1, 2026. Key relief measures include a reduction in the Tax Collected at Source (TCS) rate on overseas tour packages and remittances for education and medical treatment to 2%. The time limit for filing revised income tax returns has been extended to March 31, and interest awarded by the Motor Accident Claims Tribunal will be exempt from income tax.

Focus on Agriculture, Health, and Education

The budget introduced 'Bharat Vistar', a multilingual AI tool designed to integrate agricultural portals and provide customised advisory services to farmers. Support for animal husbandry, fisheries, and high-value crops like coconut and sandalwood was also announced.

In healthcare, the government will support the establishment of five regional medical tourism hubs and set up three new All India Institutes of Ayurveda. To boost clinical research, a network of over 1,000 accredited clinical trial sites will be created.

For education and skilling, the Khelo India Mission will be strengthened, and an 'Education to Employment and Enterprise' Standing Committee will be formed to focus on the services sector. The budget also proposes developing five university townships near major industrial hubs to foster industry-academia collaboration.