Union Budget 2026–27 targets youth and growth with simplified tax, ₹12.2 lakh crore capex

Hyderabad: Union Finance Minister Nirmala Sitharaman on Sunday presented the Union Budget 2026–27 in Parliament. She described it as a youth-driven and reform-oriented roadmap for building a developed and inclusive India. Notably, the Budget fixes the fiscal deficit target at 4.3 per cent of GDP. At the same time, it raises capital expenditure to a record ₹12.2 lakh crore. Together, these measures signal a strong push toward growth with fiscal discipline.

Importantly, officials prepared the Budget at Kartavya Bhawan for the first time. The framework rests on three core kartavya: accelerating growth, fulfilling aspirations, and advancing inclusive development. Moreover, the approach aligns with the vision of Sabka Sath, Sabka Vikas. The government also reaffirmed its commitment to fiscal consolidation, administrative efficiency, and economic reforms. In addition, the Budget places strong emphasis on sustainability and digital governance.

Income tax reforms and compliance measures

The Finance Minister confirmed that the New Income Tax Act, 2025, will come into force from April 2026. Alongside this, the government will introduce simplified forms and clearer rules. As a result, taxpayers can expect easier compliance.

Furthermore, the Budget cuts TCS on overseas tour packages to 2 per cent. It also streamlines TDS on manpower services. In addition, taxpayers will get extended timelines to file revised returns. The government has also proposed a one-time six-month foreign asset disclosure scheme. This measure targets young professionals and returning NRIs.

In direct tax policy, the government has rationalised penalties and prosecution. Authorities will now integrate assessment and penalty orders. Moreover, they will halve the pre-payment requirement for appeals. Importantly, taxpayers involved in misreporting cases can claim immunity after paying full dues. The new framework also allows updated returns even after reassessment proceedings.

Big push for youth, MSMEs, and infrastructure

To boost domestic manufacturing, the government announced Biopharma Shakti, a ₹10,000 crore scheme for biologics and biosimilars. Under this programme, it will establish three new pharmaceutical institutes and upgrade seven existing ones. In addition, it plans to develop 1,000 clinical trial sites nationwide.

Meanwhile, MSMEs received a major boost. The Budget announced a ₹10,000 crore SME Growth Fund to help selected firms scale up. Likewise, the textile sector will benefit from Samarth 2.0, an integrated modernisation programme. Five linked sub-schemes will support fibres, clusters, skilling, and sustainability.

Public capital expenditure will rise to ₹12.2 lakh crore in FY27, up from ₹11.2 lakh crore in FY26. The government will channel these funds into Dedicated Freight Corridors, 20 new National Waterways, and City Economic Regions (CERs). Each CER will receive ₹5,000 crore over five years through challenge-based funding.

In addition, the government plans seven high-speed rail corridors. These routes will connect cities such as Mumbai, Pune, Hyderabad, Chennai, Bengaluru, and Varanasi. The projects aim to strengthen regional integration and promote sustainable transport.

Education, skilling, sports, and tourism initiatives

The Budget makes a strong push toward education and skills. The government will build a girls’ hostel in every district to support STEM students. Meanwhile, the Indian Institute of Creative Technologies, Mumbai, will establish AVGC Content Labs in 15,000 schools and 500 colleges. This move targets the fast-growing animation and gaming sector.

Tourism will also see renewed focus. The government plans a 12-week guide training programme in partnership with IIMs. Additionally, it will set up five Regional Medical Hubs to promote medical tourism. The Khelo India Mission will expand talent identification, coaching, and the integration of sports science over the next decade.

Inclusive growth and regional development

Under the third kartavya, the Budget prioritises inclusive growth. It targets women, farmers, persons with disabilities, and eastern states. Notably, the government proposed Bharat-VISTAAR, a multilingual AI tool. This platform will integrate AgriStack and ICAR data to deliver customised farm advisory services.

In the health sector, the government plans a second NIMHANS. It will also upgrade mental health institutes in Ranchi and Tezpur. Meanwhile, the Budget promotes Buddhist tourism circuits in northeastern states. It also supports Self-Help Entrepreneur Marts and provides capital for 4,000 electric buses. An East Coast Industrial Corridor, with a major node at Durgapur, is also on the agenda.

Customs, indirect tax, and ease-of-doing reforms

The Budget introduces wide-ranging customs and indirect tax reforms. These measures aim to simplify tariffs and improve competitiveness. Accordingly, the government has reduced or removed import duties on lithium-ion battery parts, solar glass inputs, aircraft components, and capital goods for critical minerals.

In a key change, the tariff on personal imports has dropped from 20 per cent to 10 per cent. Moreover, 17 medicines for rare diseases are now duty-free. The government will also shift customs warehousing to an operator-centric self-declaration model, supported by electronic tracking and AI-based risk assessment.

To facilitate trade, authorities will roll out the Customs Integrated System (CIS) within two years. Cargo clearance will move to a single digital window by year-end. Meanwhile, the government has clarified safe-harbour margins and tax exemptions for bonded warehouses to attract global investors.

MAT credit rules will change to ease migration to the new tax regime. In addition, non-resident global experts will receive five-year tax holidays on foreign income. Promoters, however, will come under a revised buyback tax regime based on capital gains.

Finally, the government has removed the value cap on courier exports to support small exporters. Fish caught in Indian waters and landed at foreign ports will now qualify as exports. As a result, they will no longer attract customs duty.