Union Budget 2026-27: Big capex, tech sovereignty, and a new tax era

New Delhi: Finance Minister Nirmala Sitharaman presented the Union Budget for FY 2026-27 on February 1, her record-breaking ninth consecutive budget. The 2026 budget focuses on three core "Kartavyas" (duties): accelerating economic growth, fulfilling citizen aspirations, and ensuring inclusive resource access.

Here are the key announcements from the 2026 Union Budget:

Finance Minister Nirmala Sitharaman presented the Union Budget for FY 2026-27 on February 1, her record-breaking ninth consecutive budget. The 2026 budget focuses on three core "Kartavyas" (duties): accelerating economic growth, fulfilling citizen aspirations, and ensuring inclusive resource access.

Here are the key announcements from the 2026 Union Budget:

Rs 12.2 lakh crore for basic infrastructure

The government has raised capital expenditure to Rs 12.2 lakh crore for FY 2026-27 to boost infrastructure development across the country – from roads and railways to waterways and logistics – aiming to support economic growth and job creation.

Increase in defence expenditure

Defence spending has been significantly increased to strengthen national security and modernise the armed forces, with higher allocations for equipment, aircraft, naval assets, and other strategic capabilities.

Girls’ hostels for women

To promote gender equity in education, especially in STEM fields, the budget proposes establishing girls’ hostels in every district, making higher education more accessible and safe for female students.

Digital knowledge grid for education

A National Destination Digital Knowledge Grid will be created to digitally document and disseminate significant cultural, spiritual, and heritage information, which will also generate job opportunities in research, content, and technology.

Lower duty on medicine

Basic Customs Duty (BCD) has been exempted on 17 specified drugs and medicines, including those used in cancer treatment, to reduce treatment costs for patients.

Semi-conductor Mission 2.0

Building on the success of the first phase, ISM 2.0 was launched. It focuses on the domestic design and manufacturing of semiconductor equipment and materials, with a specific provision of ₹1,000 crore for FY 2026-27 to build a "full-stack" Indian IP ecosystem.

AI tool for knowledge in agriculture

The budget outlines the launch of ‘Bharat Vistar’, a multilingual AI tool integrating agricultural data and best practices to help farmers make informed decisions, improving productivity and access to knowledge.

Tax announcements for foreign education, tour packages, medical treatment

Tax rules have been eased for overseas expenditures: TCS (Tax Collected at Source) rates on foreign education fees, tour packages, and medical treatment abroad under the Liberalised Remittance Scheme (LRS) have been reduced to 2%, lowering costs for Indians going abroad for these purposes.

MSME (Micro, Small and Medium Enterprises)

MSMEs will receive enhanced support, including a dedicated Rs 10,000 crore growth fund and other measures to boost liquidity, productivity, and competitiveness as part of a broader strategy to help them scale and create jobs.

New Income Tax Act, 2025

A new Income Tax Act, 2025 will come into effect from April 1, 2026, replacing the 1961 Act. It simplifies tax laws and compliance without changing the core tax rates, introduces modernised procedures, and aligns tax processes with contemporary economic realities.

Biopharma SHAKTI

A new scheme called Biopharma SHAKTI was introduced with an outlay of ₹10,000 crore over five years. The goal is to make India a global hub for biologics and biosimilars, including the establishment of three new National Institutes of Pharmaceutical Education and Research (NIPERs).

Rare earth corridors

To secure critical minerals, the government will establish Dedicated Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. These corridors will focus on the mining, processing, and manufacturing of minerals essential for high-tech industries.

SME growth fund

Recognizing MSMEs as the "backbone of the economy," a ₹10,000 crore SME Growth Fund was announced. This fund is designed to help small businesses scale into "Champion SMEs" by providing equity and risk capital.

Tax Holiday for AI Data Centres

In a bid to make India a global leader in AI, a tax holiday until 2047 was proposed for foreign companies providing global cloud services using Indian data centres. This move is aimed at attracting the estimated $90 billion in data centre investments currently eyeing India.

Transport & Connectivity

High-speed rail: Seven new high-speed rail corridors will be developed to connect growth clusters.

Freight corridor: A new Dedicated Freight Corridor linking Dankuni (East) to Surat (West) was approved.

Waterways: 20 new National Waterways are to be operationalized over the next five years.

Carbon capture (CCUS) outlay

The budget allocated ₹20,000 crore over five years for Carbon Capture, Utilisation, and Storage (CCUS) technologies. This is a strategic move to help hard-to-abate sectors like steel, cement, and refineries meet India's "Net Zero" commitments.

City economic regions (CER)

The government will map and develop City Economic Regions, allocating ₹5,000 crore per CER over five years. This initiative treats cities as primary drivers of regional economic growth rather than just urban centres.

(This article has been collated with the help of AI)

Tags : Nirmala Sitharaman, Union Budget, Finance Minister, Semi-conductor Mission 2.0, Basic Customs Duty