Key highlights and announcements
Growth and manufacturing
The budget is framed around three Kartavyas, duties to accelerate growth, fulfil people’s aspirations, and support inclusive development. Major initiatives target industry and manufacturing, including a Biopharma SHAKTI fund of ₹10,000 crore over five years to build a biologics and biosimilar ecosystem, three new NIPERs and 1,000 clinical-trial sites, and a ₹10,000 crore SME Growth Fund to create champion small enterprises. Seven strategic sectors such as automobiles, textiles and electronics will be scaled up via new schemes, including an expanded semiconductor manufacturing scheme increased to ₹40,000 crore and a large textile support package.
Infrastructure push
Capital expenditure is raised sharply to ₹12.2 lakh crore for 2026–27, up from ₹11.2 lakh crore in BE 2025–26. Key projects include new Dedicated Freight Corridors such as the Dankuni–Surat line, 20 new national waterways starting with NW-5 in Odisha, and seven new high-speed rail corridors linking major cities, for example Mumbai–Pune and Delhi–Varanasi. The budget earmarks ₹5,000 crore per City Economic Region over five years under a challenge-based scheme to harness urban agglomeration growth.
Human capital and technology
Education and skills receive major boosts. The Finance Minister announced five University Townships near industrial corridors and one girls’ hostel per district for female STEM students. New labs including 15,000 AVGC and AI content studios in schools and 500 colleges are planned, along with 10,000 technology fellowships at premier institutions. Tourism and culture receive support through upskilling for 10,000 tour guides and reduced fees for some overseas tour packages. Health and sports get specific packages through five regional medical tourism hubs integrating AYUSH and research facilities, and a revamped Khelo India Mission for the next decade.
Agriculture and rural
Farmer support is strengthened by extending MSP procurement to more kharif crops such as cotton, millet, pulses and oilseeds, and adding three new oilseed MSPs. Over 20 new Farmer Producer Organizations and seven agro-commodity schemes are announced, including a ₹22,000 crore nanogrid subsidy for rural renewable power. The Agristack digital platform will integrate with an AI advisory tool called Bharat-VISTAAR so farmers get ICAR best-practice recommendations. Late-payment interest relief is promised for buyers of certain perishables with a cap at two percent. The budget also raises rural water allocations under Jal Jeevan and widens farm credit.
Social welfare
Plans include expanded social safety nets. A universal social pension of ₹7,480 per month is proposed for senior citizens and disabled beneficiaries over age 80 who do not receive other pensions. The PM Awas Urban program receives a significant increase to ₹22,025 crore, reflecting a 168 percent jump. Health emphasis includes an expanded NMH allocation and duty waivers for certain cancer drugs to allow imports at lower cost. Exemptions on motor accident compensation interest are made tax-free to ease the burden on accident victims.
Sector-wise allocations
Defence
The Defence Ministry, including pensions, receives ₹7.84 lakh crore, about a 7.1 percent rise from FY25 RE. Reuters reports approximately ₹5.95 lakh crore for defence services excluding pensions.
Education
Total education spending is ₹1.39 lakh crore, up roughly 14.2 percent over FY25 RE. Funding supports new hostels, university townships, skill programs and higher education reforms through an Education-to-Employment council.
Health
Health and Family Welfare is allocated ₹1.06 lakh crore, a near 10 percent rise. The PM Ayushman Bharat Health Infrastructure Mission allocation increases 67 percent to ₹4,770 crore, while PM Swasthya Suraksha Yojana for AIIMS and medical college upgrades gets ₹11,307 crore. The National Health Mission for public health is set at ₹39,390 crore, up about six percent.
Agriculture and rural
Agriculture receives ₹1.40 lakh crore, up around 5.4 percent. Rural development is budgeted at ₹1.97 lakh crore, up 4.4 percent. Irrigation and water under Jal Shakti rise sharply to ₹94,808 crore, a large year-on-year increase reflecting front-loaded drinking water projects.
Infrastructure
Roads and Highways receive ₹3.10 lakh crore, up around 7.9 percent. Railways are allotted ₹2.81 lakh crore, an increase of about 10.1 percent. Communications and telecom see ₹1.02 lakh crore, up 28 percent, reflecting broadband and satellite initiatives. Urban development including housing and smart cities gets ₹85,522 crore, up nearly 49.5 percent, aided by housing schemes.
Other sectors
Home Affairs is at ₹2.55 lakh crore, Food and Consumer Affairs at ₹2.39 lakh crore, Rural Development at ₹1.97 lakh crore, and Chemicals and Fertilizers at ₹1.77 lakh crore, the latter down about seven percent. These numbers reflect an emphasis on infrastructure, agriculture and social sectors while some subsidies and line items were scaled back.
Tax changes – direct and indirect
Income tax
Headline tax slabs and rates remain unchanged. The new Income Tax Act 2025 will take effect from April 1, 2026, aiming to consolidate and simplify law while remaining revenue neutral. The deadline for revising returns is extended from nine months to 12 months, with provisions to update returns after reassessment subject to a 10 percent penalty. Sentences for certain offences under the IT Act are reduced and compliance measures such as passport linking and interest rationalization are eased. Interest on motor accident tribunal awards is now tax-exempt.
Corporate tax
No change in the headline corporate tax rate. The Minimum Alternate Tax, MAT, is reduced from 15 percent to 14 percent and MAT will become a final tax with companies able to use only 25 percent of existing MAT credits per year. Profits from share buybacks will now be treated as capital gains rather than dividends, affecting promoter taxation at corporate or non-corporate rates as applicable.
TDS, TCS and compliance
Targeted changes include a reduction in TCS on overseas education, medical and travel remittances from five percent to two percent. TCS on overseas tour packages is set at two percent with no value threshold. TDS procedures are eased so that non-resident property sellers’ TDS can be paid via buyers’ PAN without separate TANs. A one-time FAST-DS disclosure scheme allows taxpayers to regularize undisclosed foreign assets up to ₹1 crore by paying 30 percent of value and related income with immunity. Advance tax filing forms will be simplified.
Indirect taxes and customs
Several import tariffs are reduced to boost industry and lower costs. Exemptions include higher duty-free import limits for seafood processing inputs and extended duty waivers on lithium-ion battery capital goods and critical-mineral processing equipment. A 75 percent tariff cut applies to select nuclear power plant inputs. Customs duty on 17 cancer and rare-disease drugs has been removed. The duty on many personal imports is halved to 10 percent and personal baggage allowances are increased. Securities Transaction Tax on derivatives is increased, with futures up to 0.05 percent from 0.02 percent and options to 0.15 percent from 0.10 percent. Other changes include higher cess on cigarette inputs and improvements in customs processes such as single-window clearances and Authorized Economic Operator benefits. No GST rate cuts were announced.
States’ finance
The 16th Finance Commission recommendation to share 41 percent of central tax revenue with states is reaffirmed for 2026–31. Compensation cess for states on GST expires in 2026–27 and no replacement cess was proposed, implying states will continue to manage any revenue shortfalls.
Fiscal deficit and borrowing
Fiscal deficit
The fiscal deficit is budgeted at 4.3 percent of GDP for 2026–27, slightly down from an estimated 4.4 percent for FY2025–26. In absolute terms the deficit is ₹16.95 lakh crore versus ₹15.68 lakh crore in 2025–26. This reflects a modest fiscal consolidation consistent with the government’s medium-term plan.
Borrowings
Gross market borrowings are set at ₹17.2 lakh crore for 2026–27 with net borrowings after redemptions at ₹11.7 lakh crore. This is roughly 8.8 percent higher than FY26. Some economists cautioned that the higher gross borrowing could put short-term pressure on bond markets.
Receipts and expenditure
Total expenditure is projected at ₹53.5 lakh crore while non-debt receipts are estimated at ₹36.5 lakh crore. Net tax revenue is projected at ₹28.7 lakh crore, about seven percent higher than RE 2025–26. Debt-to-GDP is expected to decline modestly to around 55.6 percent from about 56.1 percent in FY25 owing to economic growth and fiscal restraint. Capital expenditure as a share of GDP rises to about 3.6 percent with total capex of ₹12.22 lakh crore, about nine percent higher than FY26.
Major policy reforms and initiatives
Financial sector
A high-level committee on banking reforms will be established. Foreign investment limits in Indian companies are relaxed to enable higher participation, and a new framework for corporate bond markets including bond-index derivatives is proposed. Tax rationalization measures aim to encourage investment.
Ease of business
Procedural reforms include deeper customs digitization, single-window clearances and longer validity for advance rulings. PAN and TAN distinctions are being streamlined for property transactions. Measures are planned to resolve pending litigation via immunity schemes for certain non-compliances and simplified return forms.
Science and technology
New schemes include 15,000 AI and content-creator labs in schools, 10,000 tech fellowships and a panel to study AI impact. Agriculture will get an AI-based Bharat-VISTAAR advisory tool that integrates soil and crop data. The electronics manufacturing scheme ISM 2.0 is bolstered to ₹40,000 crore with additional allocation, and PLIs for critical raw materials and solar glass are continued.
Social sector
Education and health reforms include a standing committee linking education to employment, enhanced research capacity with new ICMR and AIIMS facilities, and a stronger focus on preventive care such as screening for cancer and diabetes. Housing and drinking-water schemes for vulnerable groups are expanded and the Jal Jeevan Mission receives a significant funding push.
Reactions
Economists
Economists largely welcomed capex increases and the continuity theme while cautioning about the higher gross borrowing. Kotak Mahindra’s chief economist said the 4.3 percent deficit is reasonable but flagged the higher gross borrowing. Bank of Baroda praised capex as a growth driver and welcomed the commitment to debt reduction. Overall, analysts described the Budget as fiscally responsible and growth oriented though not transformational in tax or agricultural policy.
Industry leaders
Business responses were broadly positive. Technology and infrastructure firms welcomed the focus on semiconductors, data centers and AI skilling. Edtech and education providers applauded industry-linked training and expanded schooling capacity. Real estate and infrastructure stakeholders highlighted the record capex and an Infrastructure Risk Guarantee Fund as project enablers for Tier-2 and Tier-3 cities, though some flagged the buyback tax changes for careful financial planning. Market reactions were mixed and derivative STT hikes caused modest adjustments.
Opposition
Opposition leaders criticized the Budget as offering little for the middle class, farmers and states. Critics including former finance ministers called it a weak account of finances and argued it lacked vision on jobs, exports and manufacturing. Regional leaders noted that some large projects did not benefit their states and that the Budget was overly urban and corporate focused.
Comparison with FY2025–26 Budget
Fiscal trajectory
The 2026–27 Budget continues a path of fiscal consolidation with the deficit target trimmed to 4.3 percent from 4.4 percent in FY26. Gross borrowings rise modestly reflecting steady financing needs while capital outlay increases from about ₹11.1 lakh crore to ₹12.22 lakh crore, maintaining last year’s capex emphasis.
Sector changes
Many ministry allocations have increased relative to FY25 RE. Defence rose about seven percent to ₹7.84 lakh crore, education rose roughly 14.2 percent to ₹1.39 lakh crore and health increased about 10 percent to ₹1.06 lakh crore. Infrastructure spending notably expanded with roads, rail and communications receiving higher outlays. Jal Shakti saw a large year-on-year jump. Overall spending is up around 7.7 percent over FY26 RE.
Tax provisions and policy focus
There were no headline tax-rate cuts. The new Income Tax Act was announced earlier and will be effective this financial year with the aim of simplification. Measures such as the MAT reduction and buyback capital-gains treatment continue earlier trends toward a simpler corporate tax landscape. The Budget doubles down on infrastructure and technology programs introduced previously rather than introducing radical shifts.