Details

On 1 February 2026, Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27.

Budget Highlights 2026-27

This Budget targets Viksit Bharat 2047 by replacing the 64-year-old tax code and doubling down on manufacturing.

🏛️ The Strategic Framework: "Three Kartavyas"

The Budget is anchored on three core duties (Kartavyas):

1. Accelerate & Sustain Growth: Transitioning to productivity-led expansion.
2. Fulfill Aspirations: Empowering youth (Yuva Shakti) through skilling and education.
3. Ensure Inclusive Development: Achieving 100% saturation of "Sabka Saath, Sabka Vikas."

💰 Direct Tax: The New "Income Tax Act 2025"

The biggest structural reform is the Income Tax Act 2025, which replaces the 1961 Act effective 1 April 2026.

• Trust-Based Governance: A massive focus on simplifying compliance.

• No Slab Changes: While the tax slabs remain unchanged from the 2025 revision, the focus is on "Trust-based Governance."

• Foreign Asset Disclosure: A one-time 6-month window was announced for small taxpayers to disclose minor foreign assets (like stocks or ESOPs) without facing the harsh penalties of the Black Money Act.

• Revised ITR Deadlines: The deadline for filing revised or belated returns has been extended to March 31 of the assessment year

• New ITR Deadlines : The Deadline for Individuals/HUFs having to file forms ITR 1&2 will be July 31st. and the Deadline for Trusts & Non-Audit Business having to file forms ITR 3&4 will be August 31st 

• Tax on Buybacks: Shares buyback will now be taxed as Capital Gains in the hands of shareholders (to benefit minority shareholders) rather than as "income from other sources."

• NRI Property Transactions: TDS on the purchase of immovable property from non-residents can now be deposited using the buyer’s PAN instead of a TAN.

📈 Financial Markets & Securities

• STT Hike: The Securities Transaction Tax (STT) on Futures has been raised to 0.05% (from 0.02%) and on Options to 0.15%. This is intended to curb excessive retail speculation in the F&O segment.

• Capital Gains Rationalization: A push toward a unified holding period for different asset classes to simplify the tax regime.

The "Creator Economy" & Technology

• Indian Institute of Creative Technologies (IICT): To be set up in Mumbai, focusing on AVGC (Animation, Visual Effects, Gaming, and Comics).

• IIT Creator Labs: Launch of specialized labs within IITs to foster AI-driven content creation and digital entrepreneurship.

• Space Tech Fund: A venture capital fund of ₹1,000 crore to support space-tech startups, following the success of the Gaganyaan and Chandrayaan missions.

Green Energy & Sustainability

• Nuclear Energy Expansion: The BCD (Basic Customs Duty) exemption for nuclear power projects has been extended until 2035 and expanded to all plant capacities.

• Critical Mineral Mission: A new mission for the domestic recycling of lithium, copper, and cobalt.

• Rare Earth Permanent Magnets: Research and manufacturing incentives to reduce dependence on imports for EV motors.

Health & Social Welfare

• She MARTS: A new initiative to set up community-owned retail outlets for women-led SHGs (Self-Help Groups).

Ease of Living & Trade

• Personal Imports: Customs duty on goods imported for personal use (via e-commerce/post) has been slashed from 20% to 10%.

🚢 Trade, Imports & Exports

Strategic customs duty adjustments were made to correct the "inverted duty structure" and boost "Make in India."

Key Import Duty Cuts (Lowering Costs)

• Cancer & Rare Diseases: BCD fully exempted for 17 life-saving cancer drugs and 7 rare disease medicines.
• Aviation & Defence: Full BCD exemption for civilian aircraft components and raw materials for MRO (Maintenance, Repair, and Overhaul).
• Critical Minerals: Duty-free import of capital goods for processing lithium, cobalt, and copper.
• Personal Use: Customs duty on personal imports (e-commerce/post) slashed from 20% to 10%.

Safe Harbor for Ship Repair: New rules to make India a global hub for ship repair, including tax incentives for units in Varanasi and Patna (Inland Waterways).

Export & MSME Boost

• E-commerce: Removal of the ₹10 lakh value cap on courier exports to help small businesses.
• Marine & Leather: Duty-free import limits for seafood inputs raised from 1% to 3%. Extension of duty-free inputs to Shoe Uppers.
• Flexibility: Export window for leather and textiles extended from 6 months to 1 year.

🏗️ Infrastructure & Manufacturing

• Public Capex: Raised to ₹12.2 lakh crore (up from ₹11.2 lakh crore).
• High-Speed Rail: 7 new corridors announced, including Mumbai–Pune, Pune–Hyderabad, and Hyderabad–Bengaluru.
• Energy: Biopharma SHAKTI (₹10,000 crore) and Semiconductor Mission 2.0.
• Logistics: A new East-West Freight Corridor connecting Dankuni to Surat.
• Climate: ₹20,000 crore for Carbon Capture (CCUS) and recycling missions for critical minerals.

📈 Financial Markets & Economy

• Speculation Curb: STT on Futures raised to 0.05% and Options to 0.15%.
• SME Support: ₹10,000 crore SME Growth Fund and mandatory TReDS usage for all CPSE purchases.
• Urban Growth: City Economic Regions (CERs) with ₹5,000 crore funding each.

📊 Fiscal Indicators at a Glance

The government reaffirmed its commitment to fiscal discipline while funding massive infrastructure.

🎨 Creative & Social Sector

• Orange Economy: AVGC Content Creator Labs in 15,000 schools and 500 colleges.
• Health: 1.5 lakh caregivers to be trained; 5 regional hubs for Medical Value Tourism.
• Agriculture: Focus on high-value crops like cocoa, cashew, and coconut via the National Fibre Scheme.

⚖️ Litigation & Compliance Reforms

Reclassification of Technical Defaults

Several defaults that previously attracted heavy penalties under the 1961 Act have been moved into a "Fee" category. This means they are now treated as compensatory payments for administrative delay rather than punishment for tax evasion.

• Audit Reports: Failure to get accounts audited or failure to furnish a transfer pricing audit report.

• Financial Statements: Defaults in furnishing the Statement of Financial Transactions (SFT).

• The Difference: A "Penalty" often requires a lengthy adjudication process where the taxpayer has to prove "reasonable cause" to avoid it. A "Fee" is a fixed, automated charge (like a late fee on a utility bill), which is much lower in quantum and ends the matter immediately without further litigation.

The "Common Order" Integration

To stop the "multiplicity of proceedings," the FM proposed that Assessment and Penalty proceedings will now be integrated into a single, common order.

• No Interest on Penalty during Appeal: If you appeal against a penalty amount, you will not be charged interest on that penalty for the period the appeal is pending before the First Appellate Authority. This is a huge relief, as interest often used to exceed the penalty itself during long legal battles.

• Reduced Pre-payment: To file an appeal, you now only need to pre-pay 10% of the core tax demand (reduced from 20%), and no pre-payment is required on the penalty or interest portion.

Updated Returns (Reassessment Relief)

If reassessment proceedings have already started against you, the Budget 2026 now allows a "last window" for peace. You can file an Updated Return by paying the tax due plus an additional 10% tax. If you do this, the Assessing Officer (AO) is mandated to use your updated return as the base, effectively settling the dispute before it turns into a years-long court case.

Validity of Orders: The DIN & AO Pivot

In a major move to ensure that tax assessments are not quashed on mere technicalities, the FM introduced a "Validity Clause":

• AO Orders & DIN: Previously, many Assessing Officer (AO) orders were declared "null and void" by courts if they were issued without a Document Identification Number (DIN).

• The Change: The Budget proposes that orders issued by an AO will not be deemed invalid solely because they lack a DIN at the time of issuance, provided the DIN is generated and communicated within a prescribed grace period.

• Goal: This aims to prevent tax-dodging through technical loopholes while ensuring the department remains accountable for generating the DIN eventually.