Budget 2026 Live Updates: Tax Changes, Policies & Key Announcements

Written by : Knowledge Centre Team

2026-02-01

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The Union Budget 2026–27 sets the tone for steady economic growth with a clear focus on development, fiscal stability, and citizen-centric reforms. Stepping away from short-term fixes, the Union Budget 2026 laid out a robust roadmap for the "Viksit Bharat” vision, aiming to transform India into a developed nation by 2047.

This budget focuses on three core "Kartavyas" (Duties): Accelerating economic growth, fulfilling citizen aspirations, and ensuring inclusive development through "Sabka Saath Sabka Vikas". With a total outlay of ₹53.5 lakh crore, the government has balanced fiscal prudence with aggressive growth targets.

What makes the Union Budget 2026 highlights particularly unique this year is the aggressive push toward digital sovereignty and green manufacturing. The government has signalled a clear departure from traditional subsidy-heavy models toward an investment-led growth strategy. For the common man, the focus remains on "Ease of Living" through simplified tax compliance and enhanced disposable income.

Key Takeaways

Capital Expenditure (Capex) increased to ₹12.2 lakh crore to modernise railways and highways
Introduction of the New Income Tax Act, 2025, effective from April 1, 2026, aimed at reducing compliance
The deadline for filing revised tax returns extended to March 31 with a nominal fee
Launch of India Semiconductor Mission (ISM) 2.0 with an outlay of ₹40,000 crore
Allocation of an outlay of ₹10,000 crores to transform India into a global Biopharma manufacturing hub, focusing on high-end medical innovation

Key Highlights and Analysis of Budget 2026-2027

The Budget 2026-27 outlines key policy measures aimed at boosting infrastructure, supporting businesses, improving tax efficiency, and strengthening India’s long-term growth prospects. The highlights below capture the most impactful announcements of this year’s budget.

Direct Tax Reforms and the New Income Tax Act:

The most significant announcement for individual taxpayers is the transition to the New Income Tax Act, 2025, which will replace the legacy colonial-era laws starting April 1, 2026. While the Finance Minister did not alter the existing tax slabs for the current year, the focus has shifted toward ease of living for the middle class.

Taxpayers can now revise their returns until March 31 (previously December 31) by paying a nominal fee. This provides a much-needed window for correcting errors without heavy penalties.
In a compassionate move, interest awarded by the Motor Accident Claims Tribunal to individuals is now exempt from income tax, and TDS on such amounts has been removed.
The Tax Collected at Source (TCS) for education and medical remittances under the Liberalised Remittance Scheme (LRS) has been slashed from 5% to 2%. Similarly, overseas tour packages will now attract only 2% TCS from earlier slabs of 5% and 20%, regardless of the amount.

Infrastructure in Connecting the Growth Centres:

The government has raised the Capex target to ₹12.2 lakh crore, representing roughly 3.1% of the GDP. This funding is specifically directed toward creating "Future-Ready Infrastructure."

Seven new high-speed corridors have been proposed, including Mumbai-Pune, Delhi-Varanasi, and Hyderabad-Bangalore, to act as economic growth connectors
A new East-West corridor from Dankuni to Surat will be developed to facilitate environmentally sustainable cargo movement
₹5,000 crore has been earmarked for developing Tier-II and Tier-III cities as new hubs of economic activity
An outlay of ₹20,000 crore for Carbon Capture, Utilisation, and Storage (CCUS) technologies over five years highlights India’s commitment to Net Zero goals

Empowering the "Orange Economy" and Education:

In a forward-looking shift, the Union Budget 2026 positioned India’s creative industries as a new engine of jobs and services-led growth, and proposed to elevate India’s “Orange Economy”, the creative and culture-driven sectors that derive economic value from ideas, artistic expression, and digital media rather than traditional goods. This includes key segments such as Animation, Visual Effects, Gaming, and Comics (AVGC), which are rapidly expanding and expected to require around 2 million professionals by 2030

15,000 secondary schools and 500 colleges will host AVGC labs to prepare 2 million professionals by 2030
To boost female participation in STEM and higher education, the government will build a girls' hostel in every district

Agriculture and Rural Income Diversification:

The budget moves beyond traditional crop support to focus on high-value agriculture and livestock:

The Budget introduces dedicated programmes for coconut, cashew, cocoa, sandalwood, and nuts (walnuts, almonds, pine nuts) to boost productivity, rejuvenate orchards, enhance value addition, and strengthen India’s export competitiveness.
Bharat-VISTAAR, a multilingual AI-based system, will integrate AgriStack and ICAR advisory services to provide customised, real-time guidance to farmers, improving decision-making, productivity, and risk management.
The government will develop 500 reservoirs (Amrit Sarovars) and treat fish catch beyond territorial waters as duty-free, treating foreign landings as exports

Foreign Investment and Compliance Relief:

In a move to streamline international financial transactions and provide relief to investors, the Union Budget 2026 introduced a groundbreaking one-time compliance measure.

A one-time 6-month foreign compliance window has been introduced, allowing individuals and entities to disclose undisclosed foreign assets or income at a reduced combined tax and penalty of just 1-2%
To provide foreign investors with more hedging options, the government introduced a Total Return Swap (TRS) facility and a market-making framework for corporate bonds
Foreign companies providing cloud services globally using Indian data centers will enjoy a tax holiday until 2047, positioning India as a global digital infrastructure hub

Empowering MSMEs and Entrepreneurs:

Small businesses and startups are the cornerstone of the Union Budget 2026-27, with the government shifting its focus from demand-led expansion to productivity-led growth.

The Self Reliance India (SRI) Fund has been topped up with ₹2,000 crore to provide equity funding, helping "champion MSMEs" grow into global players.
A dedicated scheme for first-time entrepreneurs from women, SC, and ST communities has been launched. This includes "She MARTS", community-owned retail outlets designed to help women-led enterprises access better branding and market reach.

Strengthening Capital Goods Capability:

The government has recognised that a developed nation needs a robust manufacturing foundation. Therefore, the Union Budget 2026–27 lays out several new industrial support initiatives aimed at deepening domestic manufacturing capabilities and reducing import dependence:

The government will set up advanced digitally enabled tool rooms at two locations through Central Public Sector Enterprises (CPSEs). These will function as automated service bureaus capable of designing, testing, and manufacturing high-precision components at scale and lower costs, boosting the capital goods supply chain.
A dedicated CIE support programme will be introduced to strengthen the domestic manufacturing of technologically advanced construction and infrastructure machinery. This includes equipment ranging from elevators and fire-fighting systems to tunnel-boring machines used in metro and highway projects, supporting both urban and high-altitude infrastructure development.
Recognising the strategic importance of logistics and freight movement, the Budget proposes a Container Manufacturing Scheme with an overall allocation of ₹10,000 crore over five years. The objective is to build a globally competitive container production ecosystem in India, increase domestic capacity, attract investments, and reduce reliance on imports.

Integrated Programme for the Textile Sector:

Textiles remain the second-largest employer in India. The Union Budget 2026 brings a comprehensive overhaul to this sector.

The National Fibre Scheme will promote self-reliance in natural fibres such as silk, wool, and jute while also encouraging the use of man-made and next-generation fibres
A dedicated Textile Expansion and Employment Scheme will modernise traditional textile clusters by supporting high-end machinery, certification centres, and skill development to boost productivity
Mega Textile Parks will be developed under a challenge-based model, focusing on technical textiles and enhancing value addition to strengthen export competitiveness.
The Mahatma Gandhi Gram Swaraj initiative will strengthen the khadi and handloom sectors through branding support, global market linkages, and specialised training to enhance rural livelihoods.

Budget 2026 Expectations:

Wrapping Up

The Union Budget 2026 is a visionary roadmap that balances the immediate needs of the middle class with the long-term industrial aspirations of the country. By carefully balancing fiscal discipline with large investments in infrastructure and social development, the government is taking a long-term approach in Budget 2026.

While the fiscal deficit is being kept under control at around 4.3% of GDP, the focus remains on building strong foundations through reforms like the New Income Tax Act and the semiconductor mission. Instead of short-term giveaways, the budget emphasises stability and sustainable growth, signalling that India is steadily moving from an emerging economy to a strong global economic leader.

Glossary

Capital Expenditure (Capex): Money spent by the government on acquiring or maintaining fixed assets like roads, bridges, and railways
Fiscal Deficit: The difference between the government's total expenditure and its total revenue (excluding borrowings)
LRS: A scheme allowing Indian residents to freely remit up to USD 250,000 per year for various purposes
Orange Economy: A sector based on creative industries such as art, design, and entertainment, driven by intellectual property
TCS (Tax Collected at Source): The tax collected by a seller from the buyer at the time of sale, later deposited with the government

FAQs

No, the Finance Minister did not announce changes to the tax slabs in the Union Budget 2026. However, the New Income Tax Act 2025 will simplify rules and forms from April 2026.

Taxpayers can now revise their returns up to March 31 instead of December 31. This extension requires the payment of a "nominal fee" but provides more time to ensure accuracy.

The government launched India Semiconductor Mission (ISM) 2.0 with an allocation of ₹40,000 crore. It focuses on chip design, domestic IP development, and manufacturing equipment.

It refers to the Animation, Visual Effects, Gaming, and Comics (AVGC) sector. The budget proposes setting up 15,000 creator labs in schools to build a future-ready workforce for this sector.

Yes, the budget has waived customs duty on 17 cancer drugs and drugs for 7 rare diseases. It also launched "Biopharma Shakti," a ₹10,000 crore initiative for biotech innovation.

The routes include Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bangalore, Hyderabad-Chennai, Chennai-Bangalore, Delhi-Varanasi, and Varanasi-Siliguri.

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