India Union Budget 2026-27

Union Budget 2026 delivers a strong, forward‑looking push for the BFSI sector, indicating the government’s commitment to financial stability, deeper capital markets, and simplified tax administration.

The proposal to set up a High‑Level Committee on Banking for Viksit Bharat marks a major structural reform, aimed at strengthening governance, enhancing financial resilience, and better aligning credit delivery and inclusion with India’s next phase of economic growth. The NBFC roadmap further builds on this momentum, outlining clear targets for credit expansion and technology adoption, supported by the proposed restructuring of key public‑sector NBFCs to improve scale and efficiency.

On the capital‑markets front, the introduction of a market‑making framework providing access to fund and derivatives on corporate bond indices, total return swaps, and permission to Persons Resident Outside India for making direct investment in listed equities are expected to significantly deepen market participation and improve liquidity-although the increase in STT on derivatives may dampen the sentiment in the trading community.

The Budget also reflects strong responsiveness to key industry demands, many of them were highlighted in the KPMG CFO Survey, including safe harbour provisions, TDS–TCS rationalization and revisions to penalty and assessment rules (including black money law). Another prominent demand in the survey was to provide tax certainty and clarity for IFSC units which has been met through an enhanced tax holiday regime, extended from 10 to 20 years with a 15 percent post‑holiday tax rate thereby reinforcing India’s position as a global financial hub.

Overall, Budget 2026 strengthens governance, deepens markets, and reduces compliance burden-positioning India’s BFSI sector for a more competitive, globally aligned future.

India's Budget 2026 signals a steady, future-focused approach, prioritising higher capital expenditure, structural reforms, and long-term development over short-term populism. With a projected 10.4% nominal GDP growth and a shift toward strategic resilience, the Budget strengthens manufacturing, services, and global partnerships. The introduction of the Income Tax Act 2025 and measures to simplify compliance underline the push for a more predictable, growth-supportive tax environmen

This Budget reinforces the Make in India push through tailor-made incentives across emerging sectors such as electronics, semiconductors and critical minerals. On the customs front, the emphasis on integrated digital systems and measures like electronic sealing highlights the Budget’s tilt towards technology-driven trade facilitation. GST proposals remain aligned with GST Council recommendations, with no major surprises.

The Budget adopts a calibrated, sector-specific approach to Make in India, including a near doubling of the outlay for electronics component manufacturing alongside targeted support across areas such as semiconductors, critical minerals, container manufacturing, R&D, design capabilities and textiles. In a challenging global environment, this approach signals policy resolve and could meaningfully influence long-term investment decisions and India’s positioning within global manufacturing value chains.

The Budget’s amendment to the place of supply provisions for intermediary services is a long-awaited relief for the services export sector, as facilitation services earning foreign exchange will now qualify for zero-rating instead of suffering an embedded 18% GST cost. Equally important, it should put to rest prolonged disputes where non-intermediary support and back-end services were incorrectly questioned as intermediary services, thereby reducing litigation, unlocking refunds, and improving overall ease of doing business for service exporters.

The Budget reflects a calibrated, sector-specific approach to manufacturing, deploying tailored avenues across priority and emerging areas such as electronics components, semiconductors, critical minerals, R&D, design capabilities and textiles. On the customs front, the alignment with the Digital India vision through a more integrated customs system, wider access to deferred duty payment, technology-led and non-intrusive clearance processes, along with selective rate rationalisation for strategic sectors such as nuclear energy, batteries and energy storage systems, should support manufacturing competitiveness, while measures like electronic sealing for exports further strengthen trade facilitation. From a GST perspective, the amendment to the place of supply for intermediary services provides long-awaited relief to services exporters by enabling zero-rating of foreign exchange earning facilitation services and reducing prolonged classification disputes

Budget 2026 emphasizes a compliance‑friendly, trust‑enhancing tax framework over rate cuts. Few highlights being decriminalizing minor offences, enhancing voluntary disclosures, extension of revised return deadlines, TCS / TDS rationalization, encouraging deeper market participation by PROI. Revamp of buyback‑tax framework and the rise in STT on futures and options will influence investor behavior.

The efforts made to rationalize the dispute resolution mechanism and the amnesty scheme towards voluntary disclosure of overseas income/ assets will help build a trust-based framework and relief in case of minor and inadvertent non disclosures. The reduction of TCS rates will ease the cash flow stress on remittances for overseas tours, medical and education expenditure abroad.

The Budget also promises simplified forms under the new Income Tax Act.  

Budget 2026 stays focused on stability with reforms that make compliance easier and more predictable. Extended return timelines, simpler TCS rules, and clearer foreign asset reporting mark a shift toward smoother taxpayer experiences. With personal tax slabs unchanged, the priority is strengthening systems ahead of the new Income Tax Act 2025 - building a more transparent, user friendly tax environment

Despite complex macroeconomic headwinds, India has maintained a strong GDP growth exceeding 7% and projected a fiscal deficit of 4.4%, owing to over 350 reforms, including GST simplification, new labour codes, and rationalisation of mandatory quality control orders. Budget 2026 advances sector-wide reforms, facilitates ease of doing business and moves forward towards achieving our avowed objective of becoming a developed economy by 2047. 

In a bold move, the Finance Minister has exempted foreign companies in respect of income arising by way of procuring data centre services from specified data centres in India upto March 2047. This will provide a significant boost to foreign companies engaged in providing cloud computing services through Indian data centres.

With a view to provide a major boost to the IT/ ITeS sector, the safe harbour norms have been significantly relaxed by providing for a lower margin of 15.5% over cost for companies whose turnover does not exceed Rs 2000 crores. Also, the classification into low end and high end activity profile has apparently been done away with. Also, APAs for this sector will now be fast tracked, thereby providing certainty in respect of their tax liability in India.

Recognizing the strength of its young population, Budget 2026 anchors Yuvashakti around three Kartavyas – skills, innovation and responsibility – to shape India’s next phase of development. Despite a complex macroeconomic backdrop, India has continued to deliver strong GDP growth exceeding 7% and a projected fiscal deficit of 4.4%, owing to over 350 reforms, including GST simplification, new Labour Codes, and rationalization of mandatory Quality Control Orders. Budget 2026 advances reforms across several sectors, facilitates ease of doing business and moves forward towards achieving our avowed objective of becoming a developed economy by 2047.

On the tax front, measures such as simplified tax compliances, lower TCS rates, staggered time-lines for filing tax returns and rationalization of penalties and prosecution will create trust-based and business friendly tax environment. Further, in a welcome move, Budget 2026 reclassifies income from share buybacks as capital gains.

The Budget also proposes to overhaul the Safe Harbour Rules for IT/ITeS firms by raising the eligibility threshold to INR 2000 crores, introducing a uniform 15.5% margin and enabling automated approvals, thereby mitigating litigation for cross-border transactions. The Finance Minister has also exempted foreign companies in respect of income arising by way of procuring data centre services. This is a welcome move and will strengthen India’s position as a global hub for IT/ ITeS services and attract foreign investment in this sector.

Overall, Budget 2026 is a balanced, growth-oriented budget that maintains fiscal discipline while supporting long-term economic expansion.

Union Budget 2026 stays committed to a reform led growth path even as global uncertainty weighs on economies worldwide. The focus on manufacturing, MSMEs, services and infrastructure signals a steady push to build long term capacity. By offering tax clarity and simpler compliance, while avoiding short term populism, the Budget aims to keep India’s growth momentum strong and stable.

Defence Capex Budget 2026 has surged to an all‑time high of INR 2.2 lakh crore (~USD 23.9 Bn), marking a powerful 22% YoY leap post Op Sindoor – a sharp acceleration from last year’s modest 5% rise. Overall Defence Budget registers a decisive 15% YoY surge with allocations rising to INR 7.84 lakh crore (~USD 85.6 Bn). This sharp uptick signals a renewed strategic thrust towards modernization, capability ramp‑up and deeper self‑reliance across the defence ecosystem.

A notable policy move in this year’s Budget is the extension of Basic Customs Duty (BCD) exemption to raw materials used in manufacturing aircraft parts for MRO purposes, including engines – though limited to imports made by PSUs. This is a welcome step in strengthening domestic MRO capability and supply‑chain competitiveness.

At the same time, certain areas fell short of industry expectations. The defence R&D capital outlay, a long-standing priority for long term capability development, remains broadly unchanged at ~8% of total defence Capex Budget. The Space Sector has similarly seen only a modest 2.2% YoY rise to INR 13,706 crore (~USD 1.5 Bn), signaling a measured spending stance despite the sector’s rapidly evolving strategic relevance globally.

Overall, with the Defence sector once again receives the highest allocation among all ministries – accounting for nearly 15% of the Union Budget [INR 7.84 lakh crore (~USD 85.6 Bn) out of INR 53.5 lakh crore (~USD 583 Bn)]. The government has reaffirmed its sustained commitment to strengthening India’s defence preparedness. While the Budget delivers a strong capability focused push, it also underscores the need for continued dialogue around innovation led enablers such as R&D and Space.

It was encouraging to see the Finance Minister maintain a clear focus on long‑term policy priorities despite global volatility. The emphasis on emerging sectors such as semiconductors, data centres, and rare earths signals a strong forward‑looking approach.

The increase of over 22% stands out as a significant and welcome move. On the tax front, the continued push for ease of doing business and simplification is noteworthy, with the introduction of safe harbour regulations for the IT and ITES sector marking a major reform.

New steps to attract foreign investment into IFSCs also add positive momentum. Overall, the announcements present a balanced set of measures with a mix of continuity and progressive shifts.

Budget 2026 brings welcome clarity for corporate India on the direct tax front. By shifting several Income Tax Act offences to fines and penalties, the FM has eased compliance. Tax on share buybacks is now treated as capital gains for non promoter shareholders, significantly reducing the burden. A clear boost to ease of doing business.

Budget 2026 focuses on continuity of policy and ease of doing business while creating an enabling regulatory environment for attracting foreign investments in targeted sectors like electronics manufacturing, data centres and GCCs.

Budget 2026 is ambitious and timely. As India accelerates infrastructure, manufacturing, and AI-led growth, the real differentiator will be how well governance, risk management, and accountability are embedded into execution - not treated as afterthoughts.

Union Budget 2026 presents a forward-looking roadmap for India’s journey towards Viksit Bharat, anchored in Yuva Shakti, large-scale infrastructure, and technology-led growth. The significant increase in public capital expenditure to INR 12.2 lakh crore, alongside new economic regions, freight corridors, waterways, and high-speed rail networks, underscores the Government’s intent to accelerate execution and strengthen supply-chain efficiency. The emphasis on frontier manufacturing sectors - such as semiconductors, bio-pharma, chemicals, and MSMEs - signals a decisive move towards building globally competitive industrial capabilities, with tier-2 and tier-3 cities positioned as the next growth frontiers.

The proposal to set up a new Banking Committee for Viksit Bharat is a timely step towards strengthening financial-sector governance, improving credit flow discipline, and aligning banking reforms with India’s long-term growth and risk-resilience priorities. As NBFCs, MSMEs, and private capital play a larger role in financing and execution, robust governance frameworks, transparent controls, and effective risk management will be critical to prevent execution slippages, manage third-party risks, and safeguard public and private capital. The renewed focus on AI, quantum technologies, and digital infrastructure further elevates the need for strong data governance, cyber resilience, ethical AI frameworks, and forensic readiness.

The Budget’s commitment to fiscal consolidation, simplified tax laws, and ease-of-doing-business reforms reinforces the message that sustainable growth must be underpinned by disciplined execution, institutional trust, and accountability. For businesses, success in this next phase will depend not just on opportunity, but on how effectively risk, compliance, and governance are embedded into strategy and operations.

The Budget clearly underscores its commitment to sustaining India's manufacturing momentum while fortifying the supporting ecosystem and infrastructure. These initiatives will substantially elevate India’s standing as a strong manufacturing nation globally.

Budget 2026–27 sets the stage for India’s next manufacturing leap, with a clear push toward high growth emerging sectors and renewed thrust on strengthening established industries. In addition to focussed capex on select sectors, the budget has also strengthened enablers for manufacturing with it increased focus on MSME support, Infrastructure funding, new dedicated Freight corridors, promoting waterways along with skill building initiatives.   

The globe is watching India’s progress on Electronics and semiconductor mission and Budget’s increase outlay will signal India’s focus to strengthen these sectors. The budget will enable India to become a hub for electronic components manufacturing and will also help in building Full stack and ecosystem for Semiconductor manufacturing in terms of Equipment, Chemicals, Assembly and Packaging facilities.

Also, capital goods manufacturing will be instrumental in strengthening manufacturing in any country. Budget’s focus on building Hitech Tool rooms in CPSEs  and strengthening domestic manufacturing of high value and technologically advanced Construction and Infrastructure Equipment will help scale up to meet the infrastructure requirement in the country as well as will promote exports. Exemption from income tax for five years to non residents providing capital goods, equipment or tooling, to any toll manufacturer in a bonded zone will further strengthen the supply ecosystem for this sector.

MSMEs are the backbone of manufacturing industry in the country. The budget has provided clear focus to support MSMEs in terms of increased allocation to SME Growth Fund, the Self-Reliant India Fund (2021) and Liquidity Support through TReDS.  FM’s initiative to facilitate Professional Institutions to develop ‘Corporate Mitras’ especially in Tier-II and Tier III towns will help address the capability gaps in MSMEs which is the need of the hour.

The Budget has continued its focus rightly on building the infrastructure with its increased outlay of 12.2 Lac Cr to increase logistics connectivity that will enhance competitiveness for Indian manufacturers. In addition, more dedicated freight corridors, operationalizing new waterways and launching a Coastal Cargo Promotion Scheme to increase the share of inland waterways and coastal shipping from 6% to 12% by 2047 will help optimise logistics costs. FM’s focus to promote Container manufacturing and Sea plane manufacturing will immensely help addressing both the objectives of logistics efficiency enhancement and promoting manufacturing activity. Simplification of customs process will add further fillip.

Overall, the budget clearly underscores its commitment to sustaining India’s manufacturing momentum while fortifying the supporting ecosystem and infrastructure. These initiatives will substantially elevate India’s standing as a strong manufacturing nation globally.

The Budget strengthens real estate fundamentals through higher infrastructure spending, support for industrial and urban development, social infrastructure projects, new capital flow mechanisms, and tourism and transport initiatives, creating growth opportunities across residential, commercial, industrial, and hospitality segments.

Budget 2026-27 outlines a wider development footprint that could reshape demand patterns across residential, commercial, industrial and hospitality real estate. The Budget introduces measures that may expand the country’s industrial and urban development footprint, with potential knock on effects across various real estate asset categories. The revival of legacy industrial clusters, establishment of Mega Textile Parks, and rollout of City Economic Regions point to more structured spatial planning across Tier II and Tier III cities. Proposals for Education Townships and Regional Medical Hubs further add to the pipeline of social and institutional infrastructure that may influence mixed use and residential demand around emerging economic centres. The proposed Infrastructure Risk Guarantee Fund, dedicated CPSE REITs, and incentives for larger municipal bond issuances aim to strengthen capital flows into real estate and urban infrastructure. The development of seven High Speed Rail corridors and multiple tourism linked projects could expand new growth corridors and support hospitality related real estate. 

Overall, the Budget outlines a broader development agenda that may shape medium-term demand across residential, commercial, industrial, and hospitality segments.

This Viksit Bharat - Union Budget 2026-27, plays an enabler role, with an emphasis on reviving consumption, increasing spending power, investments in rural economies and last mile connectivity, potentially making it pivotal for the next phase of India’s FMCG and consumer goods sector.

For the Consumer sector the proposed Union Budget 2026 - 27 framed under the Viksit Bharat growth agenda is largely encouraging and providing incentives for not only ease of doing business but also speed of doing business. Reviving consumption remains a central theme, simultaneously pushing demand and protecting margins.

We are seeing measures that specifically bolster disposable incomes, especially in well performing markets for consumer goods and FMCG sectors, such as rural and semi urban India. The proposed budget also creates expectations of simpler compliance, reduced capital stress and enhancements of input tax credits. In addition, the focus on encouraging tourism should positively impact consumer spending.

The measures for reduced input costs through support for domestic manufacturing, improved logistics infrastructure, and incentivising supply chain enhancements as well as measures that support tax incentives favouring healthier products and sustainable packaging, could help businesses compete globally and reducing environmental impact, signaling a positive push towards greener industrial practices.

The emphasis on increasing spending power, investments in rural economies and last mile connectivity will be pivotal for the next phase of India’s FMCG and Consumer Goods sector.

Reform as stated Kartavya - policies announced by Hon'ble FM today aimed at accerlerating growth, building capacity and 'opportunities for all' - thereby improving foundation to majorly push manufacturing, while retaining focus on services and agriculture.

The 2026 Union Budget, presented by Hon.FM Nirmala Sitharaman, outlines a strategic roadmap with profound implications for Kerala’s industrial and infrastructural landscape. A cornerstone of this vision is the announcement of a dedicated Rare Earth Corridor, positioning Kerala as a pivotal hub for critical mineral mining and processing. This initiative, which leverages the state's abundant mineral resources, is expected to catalyze high-tech manufacturing and research, particularly in the defense and space sectors.  

Furthermore, the budget’s record ₹12.2 lakh crore capital expenditure provides a significant tailwind for the state’s ambitious transport projects. Federal support is anticipated to complement state-led initiatives such as the Regional Rapid Transit System (RRTS) and the expansion of the Vizhinjam International Seaport. These developments, coupled with the "Coastal Cargo Promotion Scheme," aim to double the share of inland waterways and coastal shipping, enhancing Kerala’s role in global logistics – as also is the ecosystem envisaged for ship-repair.  

By integrating the state into national semiconductor and green energy missions, the budget facilitates a transition toward a knowledge-driven economy. For Kerala, these measures signal a future defined by enhanced connectivity, industrial modernization, and a robust framework for job creation in emerging technological corridors.

The emphasis on data centres and chemical parks creates new demand anchors for clean energy sector. If planned innovatively to align with India’s sustainability ambitions, these assets could be built green - driving demand for renewable power and storage as well as clean intermediates such as green ammonia and methanol to replace grey commodities used in chemical industry.

Budget 2026 targets several critical levers for building India’s global competitiveness - manufacturing depth, infrastructure expansion and long term capability creation - but has naturally drawn mixed reactions from markets and industry. On the clean energy front, however, it marks a deliberate and necessary upstream pivot: toward materials security, manufacturing depth and systemic risk mitigation. This shift is timely. India’s energy transition is increasingly constrained not by ambition, but by execution capacity in complex, capital intensive systems.

The exemptions for capital goods needed to process critical minerals, along with support for mineral rich states such as Odisha, Kerala, Andhra Pradesh and Tamil Nadu to develop dedicated rare earth corridors, strengthen integrated supply chains across mining, processing and manufacturing. This is essential for India’s upstream self reliance in clean tech manufacturing, which depends heavily on critical minerals. The Budget also introduces targeted customs duty exemptions that ease real cost bottlenecks in domestic clean energy manufacturing. These include BCD exemptions for capital goods used in producing lithium ion cells for battery energy storage systems, exemption on sodium antimonate used in solar glass manufacturing, and duty free imports for nuclear power projects. Together, these measures strengthen cost competitiveness and accelerate the build out of a resilient domestic supply chain. While detailed guidelines for the container manufacturing scheme are awaited, it has the potential to support storage deployment by enabling domestic battery containerisation and reducing reliance on imported balance of system components.

Beyond energy hardware, the proposal for dedicated chemical parks creates a credible pathway for scaling green chemistry, including green ammonia and green methanol, by embedding clean power, clean fuels/ chemical intermediaries and CCU into industrial design. Similarly, tax incentives for cloud services and data centres present an opportunity to anchor large, predictable renewable demand if green power procurement is enabled. 

Separately, the creation of the Infra Risk Guarantee Fund and the renewed emphasis on REC and PFC mark an important shift in addressing financing risk for capital-intensive clean-energy projects. The Budget also signals continued support for emerging technologies, with CCU and nuclear recognised as part of a broader decarbonisation toolkit.

However, transmission constraints, grid-integration challenges and the limited availability of firm, dispatchable clean power remain binding risks. As the transition enters a more execution-heavy phase, success will depend on delivery, risk-sharing and demand credibility.

Much of the immediate discussion around Budget 2026 has focused on allocations and sector-specific announcements. An equally important dimension, however, lies in how the Budget is beginning to shape new sources of long term demand for clean energy and fuels. 

The proposals on cloud services and data centres are a good example. By offering long-term tax certainty and safe-harbour frameworks, the Budget is clearly signalling intent to position India as a global hub for digital infrastructure. Data centres are large, predictable consumers of power with long investment horizons and rising decarbonisation pressures. If enabled with access to green power and storage, they can become anchor buyers of renewables and firm clean energy, creating strong new demand centers.

The proposal to establish dedicated chemical parks reinforces this demand-side opportunity. While the Budget does not explicitly describe these as green, there is scope - if they are planned thoughtfully - to design them as integrated, low-emission industrial clusters. Such parks could anchor sustained demand not only for renewable power, but also for clean intermediates such as green ammonia and green methanol across multiple downstream value chains. Embedding clean energy procurement and CCU into park design would allow decarbonisation to be built into industrial infrastructure, rather than retrofitted later at higher cost.

Taken together, data centres and chemical parks point to a quieter but important shift in how demand for clean energy can be created - one that complements supply-side policy and deserves closer attention.