5 major Union Budget 2026 moves by FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Sunday, February 1, presented the Union Budget 2026–27, combining fiscal consolidation with targeted policy interventions across taxation, infrastructure, manufacturing and services. The following are five major policy moves announced in the Budget:

1. Fiscal consolidation path reaffirmed

The government reiterated its commitment to fiscal discipline, pegging the fiscal deficit at 4.3 per cent of the gross domestic product (GDP) in FY27, lower than 4.4 per cent in FY26, Sitharaman said.

Total expenditure for FY27 has been set at Rs 53.5 lakh crore, while the debt-to-GDP ratio is projected at 55.6 per cent, signalling continued focus on debt consolidation.

The Budget also retains 41 per cent tax devolution to states, as recommended by the 16th Finance Commission.

2. Capital expenditure and infrastructure push sustained

Capital expenditure has been raised to Rs 12.2 lakh crore, underscoring the government’s continued reliance on public investment to support growth.

Key infrastructure-related announcements include:

• Setting up an Infrastructure Risk Guarantee Fund to reduce risks for private developers
• Dedicated Real Estate Investment Trusts (REIT) to recycle Central Public Sector Enterprises (CPSE) assets
• Development of an East Coast Industrial Corridor with a node at Durgapur
• Provision for 4,000 electric buses
• Rs 20,000 crore over five years for carbon capture, utilisation and storage

3. New Income Tax Act and compliance reforms

The Budget confirms that the Income Tax Act, 2025, will come into force from April 1, replacing the six-decade-old tax law.

The new law introduces:

• A single “tax year,” removing the assessment year–previous year distinction
• Simplified rules and redesigned tax return forms
• Extended timelines for revised returns
• Staggered filing deadlines for different taxpayer categories

The Centre said the law is revenue-neutral and aims to reduce disputes and improve ease of compliance.

4. Manufacturing, exports and customs rationalisation

To support domestic manufacturing and exports, the Budget announced:

• Rs 40,000 crore for India Semiconductor Mission 2.0
• Three new chemical parks and the revival of 200 legacy industrial clusters
• Rs 10,000-crore Small and Medium Enterprises (SME) Growth Fund
• Export-friendly customs measures, including higher duty-free input limits for seafood exports and concessions for SEZ units

The Budget also proposes wide-ranging customs duty rationalisation, including duty exemptions for critical minerals, aircraft parts, nuclear projects and clean energy inputs, as well as reduction of customs duty on personal-use imports from 20 per cent to 10 per cent.

5. Digital economy and services reforms

The Budget outlines a clear framework for strengthening India’s digital and services economy.

Key measures include:

• A tax holiday till 2047 for foreign companies setting up global data centres in India
• Clubbing of software services, IT-enabled services, knowledge process outsourcing (KPO) and contract research and developement (R&D) under a single Information Technology Services category
• A common safe harbour margin of 15.5 per cent
• Raising the safe harbour threshold to Rs 2,000 crore
• Automatic, rule-based approval of safe harbour applications

The government said these steps aim to improve certainty for businesses and strengthen India’s position in global digital services.