Finance Minister Nirmala Sitharaman is set to present her ninth consecutive Union Budget on February 1, 2026, in the Lok Sabha, with significant expectations centered around economic reforms aimed at bolstering growth amidst heightened geopolitical uncertainties. This Budget is particularly crucial as it follows the implementation of the new Income Tax Act, 2025, effective from April 1, and aims to address both macroeconomic stability and individual taxpayer relief.
Top Expectations from Union Budget 2026-27
Customs Duty Overhaul
The Budget is expected to propose a comprehensive overhaul of the Customs duty regime, drawing inspiration from the GST structure rationalization. Key measures may include:
- Reducing the number of Customs duty rates and slabs to simplify the system.
- Introducing an amnesty scheme to resolve disputes and unlock approximately ₹1.53 lakh crore stuck in litigation.
- Procedural simplifications to enhance ease of doing business and boost trade efficiency.
TDS Rationalization
Another major focus is the rationalization of Tax Deducted at Source (TDS) categories. The government is likely to streamline TDS into fewer rates and slabs, making compliance easier for businesses and individuals while reducing administrative burdens.
Fiscal Management and Debt Reduction
With India's fiscal management shifting from deficit control to debt reduction, the Budget is anticipated to outline a clear path for targeting the debt-to-GDP ratio starting from the 2026-27 fiscal year. This strategic move aims to ensure long-term economic stability and sustainable growth.
Individual Taxpayer Relief
For individuals, there are hopes for further relief following last year's Income Tax exemption limit hike to ₹12 lakh and GST rate cuts. Expectations include:
- An increase in the standard deduction to provide additional savings.
- Incentives to encourage a shift from the old tax regime, which offers numerous exemptions, to the new regime with lower tax rates but no exemptions.
Transition Provisions for New Income Tax Act
Given the new Income Tax Act, 2025, coming into effect, the Budget is expected to detail transition provisions, rules, and FAQs to ensure a smooth implementation and better understanding for taxpayers and industries.
Defence and Geopolitical Focus
In light of rising geopolitical tensions, the Budget may allocate higher funds for defence expenditure to strengthen national security and preparedness.
Social Welfare and Employment Schemes
The outlay for the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) scheme is likely to be emphasized, with costs shared between the Centre and states in a 60:40 ratio to promote employment and rural livelihoods.
Pay Commission and State Devolution
Provisions for the 8th Pay Commission, expected to be implemented from January 1, 2026, and tax devolution to states as per the 16th Finance Commission recommendations, are also on the agenda to support public sector employees and state finances.
Support for MSMEs and Key Sectors
The Budget may introduce incentives for Micro, Small, and Medium Enterprises (MSMEs) and tariff-sensitive sectors such as gems and jewellery, ready-made garments, and leather to boost exports and domestic manufacturing.
Critical Minerals Funding
Funding for the exploration and processing of critical minerals like lithium, cobalt, and rare earth magnets is anticipated to enhance India's self-reliance in strategic resources and support green energy initiatives.
Overall, Union Budget 2026-27 is poised to be a landmark event, balancing fiscal prudence with growth-oriented reforms to navigate global challenges and propel India towards economic resilience.
