Every year, the Union Budget sets the tone for India’s economy. But let’s be honest — most budget coverage is either too technical or too shallow to actually help you understand what changes matter for your wallet, your career, and your investments. So we did the heavy lifting for you.
Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27 in Parliament on February 1, 2026. It was a historic occasion — the first time in India’s independent history that a Union Budget was tabled on a Sunday. Here’s everything you need to know, explained simply.
The Big Picture: Three Guiding Principles
FM Sitharaman framed this year’s budget around three “kartavyas” or duties. The first focuses on sustaining economic growth and building resilience against global volatility. The second is about building the capacity of citizens and making them active partners in India’s prosperity. The third centres on inclusive development — the idea that growth should reach everyone, not just a select few.
These aren’t just buzzwords. They actually shape where the money is going.
Income Tax: What Changed for Salaried Indians?
This is what most Indians care about first, so let’s get straight to it.
The good news: the government has not changed income tax slabs or rates for FY 2026–27. That means the zero-tax threshold of ₹12 lakh under the new tax regime, introduced in Budget 2025, continues to apply. For salaried employees, the ₹75,000 standard deduction pushes the effective tax-free income to ₹12.75 lakh.
Now, the bigger headline is structural. The Income Tax Act, 2025 will officially come into force on April 1, 2026, replacing the 60-year-old Income Tax Act of 1961. This is one of the most significant tax reforms in India’s history. The new law simplifies the entire framework — fewer sections, clearer language, and a redesigned set of return forms.
Beyond that, several taxpayer-friendly changes were announced. The deadline for filing revised income tax returns has been extended from December 31 to March 31 of the assessment year. You can now correct mistakes in your return with just a nominal fee, giving you much more breathing room. For non-audit taxpayers filing ITR-3 and ITR-4, the due date has also been pushed to August 31.
For NRIs, there’s a welcome simplification too. TDS on the sale of immovable property by NRIs will now be deducted by the resident buyer using their PAN-based challan. This removes the earlier requirement for NRIs to quote a TAN, making the whole process far less cumbersome.
Capital Expenditure: The Government Is Spending Big
The government has raised capital expenditure to ₹12.2 lakh crore for FY 2026–27. That’s a 9% increase over the previous year’s allocation of ₹11.21 lakh crore. To put this in context, public capex was just ₹2 lakh crore back in 2014–15. The scale of increase is staggering.
Where is this money going? Roads, railways, ports, freight corridors, and waterways. The budget proposes seven high-speed rail corridors and the operationalisation of 20 new national waterways. Railways alone received ₹2,77,830 crore — the highest ever allocation. The government is also setting up an Infrastructure Risk Guarantee Fund to encourage private players to invest alongside public spending.
The fiscal deficit target for FY 2026–27 has been pegged at 4.3% of GDP, slightly lower than the current year. This signals that the government is serious about fiscal discipline even while increasing spending — a difficult balancing act that markets are watching closely.
MSMEs: Finally Getting the Push They Deserve
If there’s one sector that got a major boost in Budget 2026, it’s MSMEs. FM Sitharaman described them as a “vital engine of growth” and backed it up with real numbers.
A dedicated ₹10,000 crore SME Growth Fund has been announced to help smaller businesses scale up. On top of that, the Self-Reliant India Fund is being topped up with an additional ₹2,000 crore to support micro enterprises. The approach this time is notably different — the government is moving away from debt-heavy support and towards equity and quasi-equity funding. This means MSMEs can grow without drowning in debt.
The budget also introduced “Corporate Mitras” — a cadre of trained professionals who will help small businesses in Tier-2 and Tier-3 towns navigate regulatory compliance. Think of them as compliance guides for entrepreneurs who don’t have the resources to hire expensive consultants.
Manufacturing and Technology: India’s Bet on Self-Reliance
The budget made a massive push across seven strategic manufacturing sectors. India Semiconductor Mission 2.0 was launched with a ₹40,000 crore outlay to accelerate domestic chip production. The Electronics Components Manufacturing Scheme received a doubling of support, also to ₹40,000 crore.
Rare earth corridors are being set up in states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to reduce India’s dependence on imports for critical minerals. The BioPharma Shakti mission was announced to position India as a global leader in pharmaceuticals research and manufacturing.
And for the tech enthusiasts — the budget proposes a tax holiday until 2047 for foreign companies offering cloud services through India-based data centres. This is a long-term play to make India the world’s data centre hub.
What About Investors and the Stock Market?
Budget 2026 did bring one change that rattled markets. The Securities Transaction Tax (STT) on futures trading has been raised from 0.02% to 0.05%, and on options to 0.15%. The government justified this by pointing to the massive volumes in F&O trading — reportedly over 500 times India’s GDP. This move is aimed at cooling speculative activity rather than hurting long-term investors.
On the positive side, individuals resident outside India (PROIs) will now be permitted to invest in listed Indian companies through the Portfolio Investment Scheme. This opens doors for the Indian diaspora to participate in India’s growth story more easily.
Also, share buyback proceeds will now be taxed as capital gains for all shareholders. Promoters will additionally pay a levy on buybacks. This changes how companies return value to shareholders, so it’s worth keeping an eye on if you hold stocks of companies known for buybacks.
Health, Education, and Social Welfare
The budget isn’t all about numbers and taxes. The Health Ministry received ₹1,06,530 crore — nearly a 10% rise. Five regional medical hubs are being set up to promote medical tourism. 17 cancer medicines have been exempted from customs duty, bringing real relief to patients and families dealing with one of the most expensive diseases.
On education, the government is setting up five university townships near major industrial and logistics centres. A Girls’ Hostel is being built in every district. And the Divyang Kaushal Yojana will provide customised training to differently-abled individuals in IT, AVGC, and hospitality sectors.
The Bottom Line: What Should You Actually Do?
Union Budget 2026 is not a budget of dramatic tax cuts or sweeping personal finance changes. It’s a budget focused on long-term structural reform — cleaner taxes, bigger infrastructure, stronger manufacturing, and support for small businesses. For most salaried Indians, the status quo on tax slabs continues, but the simplification of the entire tax system from April 1 is a genuine step forward.
If you’re an investor, watch the STT changes and how they affect your F&O strategy. If you own or plan to start a small business, the MSME support ecosystem is the strongest it has ever been. And if you’re an NRI, the eased compliance rules and new investment avenues are worth paying attention to.
India’s economic story in 2026 is about playing the long game. And this budget, for better or worse, is very much built around that idea.
Disclaimer: This article is for informational and educational purposes only. It does not constitute financial or tax advice. Please consult a qualified financial advisor or chartered accountant for personalised guidance on tax planning and investments. Tax rules and regulations are subject to change — always refer to the latest official notifications from the Income Tax Department.
