Key Highlights Of Union Budget And Finance Bill 2026

The Budget 2026 session at the Parliament begun on 29^th January, 2026 with the address of President of India and tabling of Economic Survey 2025-26.

The Union Finance Minister has presented her 9^th consecutive Budget for the year 2026-27 today, 1^st February, 2026 in the Parliament and also introduced Finance Bill, 2026 in the Lok Sabha. Along with Budget, a complete set of Budget documents is also presented to the Parliament.

This year’s Budget has been presented in the background of economic outlook tabled in the Parliament on 29^th January, 2026 in the form of Economic Survey 2025-26.

According to Economic Survey, GDP growth is forecast to be in the range of 6.8% to 7.2% for FY 2027 in the back drop of robust economic fundamentals.

India continues to take confident steps towards Viksit Bharat, balancing ambition with inclusion. As a growing economy with expanding trade and capital needs, India must also remain deeply integrated with global markets, exporting more and attracting stable long-term investments.

With the ongoing macro environments factors where trade and multilateralism are imperiled and access to resources and supply chains are disrupted, this year’s budget focuses to accelerate and sustain economic growth by enhancing productivity, building resilience to volatile global dynamics to fulfill aspirations of our people to for capacity building to ensure every family, community, region and sector has access to resources, amenities and opportunities for meaningful participation.

This year’s Union Budget is inspired by three Kartavyas, viz economic growth, aspirations of people and vision. This includes measures and long term reforms in various socio-economic sectors. The Government has provided Rs. 1.4 lakh crore to the states for FY 2026-27 as per 16^th Finance Commission recommendatory New Income Tax Act, 2025 shall come into effect from 1^st April, 2026 and rules / forms are expected to be notified shortly. While there are no changes in the tax slabs, many measures have been proposed for simplification and ease of living/compliances.

On Indirect Taxes front, attempt has been made for tariff simplification easy processes and trust based systems, new export opportunities etc. Changes are also proposed in GST law (CGST and IGST) in relation to valuation (post sales discounts), provisional refund for inverted duty cases, Constitution of National Appellate Authority and intermediary services. Customs Tariffs have also been rationalized and processes simplified. The Budget has a focus on simplification, ease of doing business and ease of living.

A. Budget Documents

The following is the list of Budget documents presented to the parliament on 1^st February, 2026 by Union Finance Minister:

A. Annual Financial Statement (AFS)

B. Demands for Grants (DG)

C. Finance Bill

D. Fiscal Policy Statements mandated under Fiscal Responsibility and Budget Management (FRBM) Act, 2003

(i) Macro-Economic Framework Statement

(ii) Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement

E. Expenditure Budget

F. Receipt Budget

G. Expenditure Profile

H. Budget at a Glance

I. Memorandum Explaining the Provisions in the Finance Bill

J. Output Outcome Monitoring Framework

K. Key Features of Budget 2026-27

L. Implementation of Budget Announcements 2025-26

B. Government’s ‘Sankalp’ in Budget -2026-27 is to focus on poor, underprivileged and disadvantaged inspired by three kartavya:

a. First kartavya is to accelerate and sustain economic growth

b. Second kartavya is to fulfil aspirations of our people and build their capacity

c. Third kartavya is Sabka Sath, Sabka Vikas (Development of every family, community, region and sector)

C. Union Budget – General

• Budget makes further efforts to:

a. Accelerate & sustain economic growth

b. Inclusive growth and social development

c. Strong focus on manufacturing

d. Reduced critical import dependencies

e. Building future ready strategic sectors

f. Connecting India & mobility transformation

g. Empowering MSMEs and entrepreneurship

h. Ease of doing business

i. Energy transition and security

• Major areas of Budget focus:

a. Boost Manufacturing Sectors for Sustaining Economic Growth

b. Strengthening the Foundations of Growth in Infrastructure

c. Ensuring long-term energy security and stability

d. Renewing the emphasis on Services Sector & Tax Reforms

e. High Level Committee on Banking

f. Enhancing productivity in agricultural and allied sectors

g. Urbanization in City Economic Regions

h. Major People Centric Development

i. Supporting MSMEs grow as ‘Champions’

• Major transformation measures in the domains of:

a. Measures for Manufacturing Sectors – India Semiconductor Mission (ISM) 2.0, Bio-pharma SHAKTI, Hi-Tech Tool Rooms in CPSEs & Tax reforms to boost the Industry

b. Measures for MSMEs – Equity Support, Liquidity Support through TReDS, Professional Support

c. Measures for Infrastructure Sectors – focus on developing infrastructure in cities with over 5 lakh population, large-scale enhancement of public infrastructure – InVITs, REITs, NIIF and NABFID

d. Measures for Urban development – 7 High-Speed Rail corridors, Focus on Tier II, Tier III cities, and temple-towns

e. Measures for Service Sectors – New institutions for Allied Health Professionals (AHPs), Developing NSQF-aligned programmes to training, 3 new All India Institutes of Ayurveda, Setting up AVGC Content Creator Labs

f. People Centric Development – Self-Help Entrepreneur (SHE) Marts to be set up, Divyangjan Kaushal Yojana, Trauma Care Centres in district hospitals.

D. Economy

• The Budget re-iterates the aspiration for a Vikisit Bharat by 2047
• Indian economic growth remains steady amid global uncertainties
• Indian Economy continues to be the fastest growing economy among all major global economies
• India’s economic growth to be between 6.8% to 7.2% in FY 2026-27
• Nominal GDP is projected to grow by 10% over the first advance estimates of FY 2025-26
• Fiscal deficit is estimated to be 4.3% of GDP for FY 2026-27 slightly lower than the previous year
• The government reaffirms its medium term goal of lowering the debt-GDP ratio towards ~50% by 2030, currently estimated at 55.6%
• Service Sector remains primary driver of growth expanding by 9.1%
• Capital Expenditure hit a record high with allocated Rs. 12.22 lakh crore for FY 2026-27 which is up by 11% YOY
• India’s total exports reached USD 825.3 Billion in FY 2024-25 despite of uncertain global tariff scenario
• Gross FDI inflows were recorded at USD 81 Billion in FY 2024-25

E. Direct Taxation

• New Income Tax Act, 2025 to replace the six decade old 1961 Act from 1^st April 2026. It simplifies the law, reduces ambiguity, and cuts the number of provisions significantly, helping reduce litigation and compliance burden.
• No changes have been proposed in the basis income tax slabs or marginal rates for the assessment year 2026-27
• Extended timelines to file revised returns from 31 December to 31 March for a nominal fee giving more flexibility to tax payers
• Proposal to stagger the timeline for filing tax returns – individuals to continue filing till 31^st July and Trust/Non-audit business cases till 31^st August
• Taxpayers can now update returns even after reassessment starts at an additional 10% tax rate, improving procedural fairness
• TDS on sale of immovable property by Non-Residents now to be deducted and deposited through resident buyer’s PAN based challan instead of TAN
• TCS rationalized for overseas education & medical remittances under LRS to 2% from earlier 5%
• TCS on foreign tour packages cut to 2% flat with no threshold from earlier 5%/20%
• Any Interest awarded by Motor Accident Claims Tribunal (MACT) to be exempt helping the victims / beneficiaries
• Supply of manpower services is proposed to be specifically brought within the ambit of payment to contractors for the purpose to TDS ending ambiguity leading to TDS on these services at the rate of 1%/2% only.
• The budget proposed to integrate assessment and penalty proceedings by way of a common order for both to avoid multiplicity of proceedings with no interest liability on the taxpayer on the penalty amount for the period of appeal before the first appellate authority. Moreover, pre-payment to be reduced to 10% from 20% earlier.
• A special one-time Amnesty Scheme giving a six-month disclosure window to students, young professionals, tech employees, relocated NRIs and other small taxpayers to declare undisclosed foreign assets or income
• Immunity from penalty and prosecution for declaring non-immovable foreign assets with aggregate value of less than Rs. 20 lakh w.e.f. 1^st October, 2024

F. Indirect Taxes

Customs Duty

• Section 1(2) of the Customs Act, 1962 is being amended to extend the jurisdiction of the said Act beyond the territorial waters of India, for the purpose of fishing and fishing related activities.
• A new clause is being inserted to define the expression ‘Indian-flagged fishing vessel’.
• Section 28(6) is being amended so as to provide that the penalty paid under section 28(5), on determination shall be deemed to be a charge for non-payment of duty.
• Section 28J is being amended so as to provide that advance ruling shall remain valid for a period of five years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier.
• A new section 56A is being inserted to provide special provisions for fishing and fishing related activities by an Indian-flagged fishing vessel beyond territorial waters of India.
• Changes made in Customs tariff rates and HSN Codes. New tariff lines have been created (effective from 02.02.2026)
• Legislative changes in Customs Act, 1962 and Customs Tariff Act, 1975
• Baggage Rules, 2016 is being superseded by the Baggage Rules, 2026 to rationalize the baggage provisions and addressing passenger related concerns at airports and resolution of interpretational issues. These changes shall come into effect from midnight of 02.02.2026.
• Deferred duty payment is being made monthly from the existing 15 days and a new class of ‘eligible importers’ is being created. This is being done by amending the existing Deferred Payment of Import Duty Rules, 2016.
• Basic custom duty exemption modified to cover batteries for stationary energy storage applications i.e. Battery Energy Storage Systems (BESS) also. This change is being made effective from 02.02.2026.
• Basic custom duty exemption extended to raw materials for manufacture of parts of aircraft for maintenance, repair, or overhauling of aircraft or components or parts of aircraft, including engines, provided that the goods are imported by Public Sector Units under the Ministry of Defence. This change is being made effective from 02.02.2026.
• Basic custom duty exemption extended to components or parts, including engines, of aircraft, for the manufacture of aircraft and parts thereof, provided that the importer adheres to the procedure set out in the IGCRS Rules 2022. This change is being made effective from 02.02.2026.
• Relief on imports of 17 new drugs / medicines. This change is being made effective from 02.02.2026.
• Custom duty exemption modified to include 7 rare diseases that are a part of National Policy for Rare Disease (NPRD), 2021 for extending custom duty exemption on drugs, medicines and food for special medical purposes, when imported for personal use. This change is being made effective from 02.02.2026.
• Notification No. 36/2024-Customs dated 23.07.2024 is proposed to be rescinded with effect from 01.05.2026.
• Review of various custom duty exemptions in which 102 entries are being continued, with or without modification, for two years, i.e. upto 31.03.2028. Further, 22 entries are being allowed to lapse on the end-date of 31.03.2026.
• Specified goods are exempted from Social welfare charge (SWS) vide Notification No. 11/2018-Customs. Further, Social Welfare Surcharge (SWS) will be levied on all goods falling under heading 9804 (all dutiable goods imported for personal use) with effect from 01.04.2026.
• New pneumatic tyres, of rubber, of a kind used on aircraft falling under tariff item 4011 30 00 (other than goods covered under S. Nos. 155 and 156 of TABLE I of notification No. 45/2025- Customs), attract 0.5% AIDC vide Sl. No. 13A of notification No. 11/2021-Customs. The description of the entry at Sl. No. 13A is being modified with effect from 02.02.2026 to omit the reference to S. No. 157 of TABLE I of notification No. 45/2025-Customs, following the omission of the said exemption entry with effect from 02.02.2026. The AIDC rate will continue unchanged at 0.5% for New pneumatic tyres, of rubber of a kind used on aircraft (other than those attracting NIL BCD).

Excise Duty

• The Seventh Schedule to the Finance Act, 2001 is being amended to revise the NCCD Schedule rates on chewing tobacco (HS 2403 99 10), jarda scented tobacco (HS 2403 99 30) and other tobacco products including gutkha (HS 2403 99 90) w.e.f. 01.05.2026.
• Exemption from Central Excise Duty on value of biogas/compressed biogas (CBG) contained in blended compressed natural gas (CNG)
• Deferment of date of implementation of higher excise duty on sale of unblended diesel.

Goods & Service Tax (GST)

• Section 15 of the Central Goods and Services Tax Act, 2017 is being amended to do away with the requirement of linking the post-sale discount with an agreement and to refer to issuance of credit note under section 34 where the input tax credit is reversed by the recipient.
• Section 34 of the Central Goods and Services Tax Act, 2017 is being amended so as to include the reference of section 15 in the said section.
• Section 54 of the Central Goods and Services Tax Act, 2017 is being amended to extend the provisions of provisional refund to refunds arising out of inverted duty structure.
• Section 54 of the Central Goods and Services Tax Act, 2017 is being amended to remove the threshold limit for sanction of refund claims in case of goods exported out of India with payment of tax.
• Section 101A of the Central Goods and Services Tax Act, 2017 to provide that the Central Government may, pending the constitution of the National Appellate Authority, by notification empower an existing Authority, for hearing appeals under section 101B of the CGST Act, 2017 and to provide that the provisions of sub-sections (2) to (13) shall not be applicable where a Tribunal has been so empowered under sub-section (1A). An explanation to sub – section (1A) is also being inserted to clarify that the existing Authority also includes a tribunal. This will come into effect from 01.04.2026.

IGST Act, 2017

• Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 is being omitted so as to provide that the place of supply for “intermediary services” will be determined as per the default provision under section 13(2) of the IGST Act.

The above amendments shall be effective after enactment of the Finance Bill, 2026, unless otherwise specified.

(With inputs from CA Neha Somani and CA Saurabh Agarwal)

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