Union Budget 2026 Highlights: Stability Over Tax Cuts

Introduction to Budget 2026

Finance Minister Nirmala Sitharaman presented her ninth consecutive Union Budget on February 1, 2026, outlining the government's economic roadmap for the fiscal year 2026-27. The budget was presented against a backdrop of global uncertainty, with the Finance Minister emphasizing India's macroeconomic stability, sustained growth, and moderate inflation. The core message of the budget was a commitment to continuity in structural reforms and fiscal discipline, choosing long-term stability over short-term populist measures. The speech began by acknowledging the challenging external environment while expressing confidence in India's economic trajectory, setting a tone of prudence and forward-looking policy.

Economic Outlook and Projections

The budget is anchored in a positive but cautious economic forecast. The Economic Survey, released days before the budget, projected a real GDP growth of 6.8% to 7.2% for the fiscal year 2026-27. While this is slightly lower than the 7.4% growth estimated for the current year, it positions India as one of the fastest-growing major economies globally. The Finance Minister highlighted that the government's policies have successfully maintained fiscal discipline, which has been a key pillar in building domestic manufacturing capacity, ensuring energy security, and reducing dependence on critical imports. The government's focus on public investment was reiterated as a primary driver for sustaining this growth momentum.

The Three Guiding Principles: 'Kartavya'

Finance Minister Sitharaman stated that the budget was guided by three 'kartavyas' or duties, inspired by the Prime Minister's vision. The first is to accelerate and sustain economic growth by enhancing productivity and building resilience against global volatility. The second 'kartavya' is to fulfill the aspirations of the people by building capacity and creating opportunities. The third is to ensure that every family, community, and region has equitable access to resources, promoting inclusive development. These principles formed the philosophical foundation for the specific proposals announced in the budget, signaling a holistic approach to national progress.

A Continued Push for Structural Reforms

A central theme of the budget was the unwavering commitment to structural reforms. The Finance Minister described the reform process as continuous, adaptive, and forward-looking, stating that the "reform express" is well on its way after the implementation of over 350 reforms. The objective of these reforms is to create employment, boost productivity, and accelerate overall economic growth. The budget also recognized the potential of cutting-edge technologies like Artificial Intelligence (AI) as growth multipliers, indicating a focus on modernizing the economy. This emphasis on deep-seated reforms over superficial changes underscores the government's long-term strategy.

Key Sectoral Announcements

To accelerate growth, the Finance Minister proposed interventions in six key areas, including scaling up manufacturing in strategic sectors and rejuvenating legacy industries. Two significant funds were announced to support this vision. A 'Bio Pharma Shakti' initiative was proposed with an outlay of Rs 10,000 crore over five years to develop India as a global bio-pharma manufacturing hub. This fund aims to build an ecosystem for the domestic production of biologics and biosimilars. Additionally, an 'MSME Growth Fund' worth Rs 10,000 crore was proposed to incentivize and develop small and medium enterprises, which are crucial for job creation and economic dynamism.

Income Tax Slabs Remain Unchanged

Despite widespread anticipation among salaried taxpayers and the middle class, the Union Budget 2026 did not introduce any changes to the personal income tax slabs or rates for the financial year 2026-27. Both the old and new tax regimes will continue with their existing structures. The government's focus appears to be on encouraging more taxpayers to adopt the new, simplified tax regime, which now serves as the default option. Around 70% of taxpayers have already transitioned to the new regime, which offers lower tax rates in exchange for forgoing most deductions and exemptions.

Income Tax Slabs for FY 2026-27 (New Regime)

Aligning with the New Income Tax Act

The budget's approach to taxation is also set against the backdrop of the new Income Tax Act, which is scheduled to take effect from April 1, 2026. This new act aims to simplify the language of tax law, reduce litigation, and improve compliance. The stability in tax rates in this budget is seen as a move to ensure a smooth transition to the new legal framework. The focus remains on improving the administrative side of taxation, such as faster refunds and clearer rules, rather than altering the rate structure.

Conclusion: A Budget for Consolidation

In summary, the Union Budget 2026 is a budget of consolidation and continuity. It prioritizes macroeconomic stability, fiscal prudence, and long-term structural reforms over immediate tax reliefs. By maintaining the status quo on income tax, the government has signaled its confidence in the current economic trajectory and its focus on creating a stable and predictable policy environment. The key takeaways are the strategic investments in manufacturing, MSMEs, and biotechnology, all aligned with the long-term vision of 'Viksit Bharat' by 2047. The emphasis is clearly on building a resilient and competitive economy capable of sustained growth in the years to come.