Record ₹12.22 lakh crore capex as Centre bets big on growth, jobs

ANUJA KHUSHU

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27, her ninth consecutive Budget, unveiling a growth-oriented yet fiscally prudent roadmap aimed at steering India towards a Viksit Bharat. This marked the first time a Union Budget was presented on a Sunday.

Describing the Budget as “Yuva Shakti–driven”, Sitharaman said it is structured around three core kartavyas—accelerating growth and productivity, building human capacity, and ensuring inclusive development—while sustaining the reform momentum of the Narendra Modi-led government.

Presented from the newly inaugurated Kartavya Bhawan, the Budget prioritises high public investment, manufacturing expansion, and strategic autonomy amid global economic uncertainties and supply-chain disruptions.

Public capital expenditure has been pegged at a record ₹12.22 lakh crore for FY27, about 4.4% of GDP, marking a nearly 9% increase over the current year. The government said sustained capex would remain the key driver of growth and job creation.

The total Budget outlay stands at ₹53.5 lakh crore, with non-debt receipts estimated at ₹36.5 lakh crore and net tax receipts of the Centre projected at ₹28.7 lakh crore.
The fiscal deficit has been targeted at 4.3% of GDP, while the debt-to-GDP ratio is expected to ease to 55.6%, signalling continued fiscal consolidation. Gross market borrowings are estimated at ₹17.2 lakh crore.

The proposals follow the Economic Survey 2025–26, tabled on January 29, which projected GDP growth of 6.8–7.2% in FY27.

Under the first kartavya of accelerating growth, Sitharaman announced a slew of initiatives to strengthen India’s manufacturing base and critical capabilities.

A key announcement was Biopharma SHAKTI, a ₹10,000-crore mission over five years to boost domestic production of biologics and biosimilars. The government also unveiled India Semiconductor Mission 2.0, alongside a ₹40,000-crore allocation for electronics components to reduce import dependence.

Large-scale schemes were announced for labour-intensive sectors, including mega textile parks, integrated chemical parks and modernisation of 200 legacy industrial clusters.

Infrastructure expansion remains central to the Budget, with plans for seven high-speed rail corridors, 20 new National Waterways, and dedicated freight corridors. Urban infrastructure will be strengthened through City Economic Regions, with ₹5,000 crore earmarked per region over five years.

Under the second kartavya, fulfilling aspirations and building capacity, the Budget placed strong emphasis on tourism, education, healthcare and skills.

Key announcements included girls’ hostels in every district, a National Institute of Hospitality, and skill training for 10,000 tourist guides. To boost the creative economy, AVGC content labs will be set up in 15,000 schools and 500 colleges.

Healthcare initiatives include upgrades to trauma and emergency care facilities and the establishment of NIMHANS-2 in North India. In agriculture, the government announced Bharat-VISTAAR, a multilingual AI platform integrating farm data services to boost productivity and rural incomes.

The Budget retained existing income tax slabs, but announced that a New Income Tax Act, 2025, will come into effect from April 1, 2026, featuring simplified rules and return forms.

Tax relief measures include a cut in TCS on overseas tour packages and education/medical remittances to 2%, exemption of interest on motor accident compensation from tax, and rationalisation of TDS provisions. Customs duty exemptions were extended to renewable energy, nuclear power, and electronics manufacturing inputs.

States’ share in central taxes has been maintained at 41%, in line with the 16th Finance Commission’s recommendations.

Officials said the Budget balances strategic investment with welfare, placing emphasis on MSMEs, farmers, youth and emerging technologies. With high public investment, manufacturing incentives and human capital development at its core, Budget 2026–27 seeks to strengthen India’s economic resilience and long-term growth prospects.

Union Budget 2026–27: At a Glance

Total Budget Outlay: ₹53.5 lakh cr
Public Capital Expenditure (Capex): ₹12.2 lakh cr (↑9% YoY)
Net Tax Receipts of Centre: ₹28.7 lakh cr
Non-Debt Receipts: ₹36.5 lakh cr
Gross Market Borrowings: ₹17.2 lakh cr
Net Borrowings: ₹11.7 lakh cr
Fiscal Deficit: 4.3% of GDP
Debt-to-GDP Ratio: 55.6% 

Key Highlights

First Kartavya – Growth & Productivity

Biopharma SHAKTI: ₹10,000 cr to make India a global biopharma hub.

India Semiconductor Mission 2.0 and ₹40,000 cr for electronics components.

Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh & Tamil Nadu.

200 legacy industrial clusters to be modernised.

₹10,000 cr SME Growth Fund; ₹2,000 cr for micro-enterprises.

Public capex increased to ₹12.2 lakh cr; new freight corridors & 20 waterways.

Seven high-speed rail corridors to boost connectivity.

₹20,000 cr for carbon capture & energy security.

Second Kartavya : Aspirations & Human Capacity

AVGC labs in 15,000 schools, 500 colleges to boost creative tech skills.

Girls’ hostels in every district; 5 Regional Medical Hubs; 3 new Ayurveda institutes.

1 lakh Allied Health Professionals to be trained.

National Institute of Hospitality; upskilling for 10,000 tourist guides.

15 heritage sites and decade-long Khelo India sports mission.

Third Kartavya : Sabka Saath, Sabka Vikas

500 reservoirs & Amrit Sarovars; high-value crop promotion; Bharat-VISTAAR AI for farmers.

Divyangjan Kaushal Yojana for IT, AVGC, hospitality & F&B sectors.

NIMHANS-2 in North India; upgrades in Ranchi & Tezpur.

East Coast Industrial Corridor; 5 new Purvodaya tourism destinations; 4,000 e-buses; Buddhist Circuits in NE states.

Tax & Regulatory Measures:

Existing income tax slabs retained; simplified New Income Tax Act from April 2026

TCS on overseas remittances cut to 2%

Customs duty exemptions for renewable energy and nuclear power components

Tariffs on select personal imports reduced from 20% → 10%

States’ Share in Federal Taxes: 41% 

YOU PAY LESS:

Everyday & Personal Use

Imported goods for personal use
(Customs duty cut from 20% to 10%)

Medicines and drugs
(17 medicines exempted; more rare-disease drugs duty-free)

Travel, Health & Education Payments

Overseas tour packages
(TCS reduced to 2%)

Foreign remittances for education and medical treatment
(TCS reduced to 2%)

Housing & Legal Compensation

Motor accident compensation interest
(Fully exempt from income tax; no TDS)

Electronics & Manufacturing

Microwave ovens
(Lower customs duty on components)

Aircraft parts (civil & defence)
(Customs duty exemption)

Clean Energy & Infrastructure

Lithium-ion battery equipment

Solar glass manufacturing inputs

Nuclear power project imports
(All receive customs duty exemptions)

Exports & Small Businesses

Courier exports (₹10 lakh cap removed)

Seafood, leather and footwear exporters
(Lower input costs)

YOU PAY MORE: 

Stock Market Investors

Futures trading
(STT rlaised from 0.02% to 0.05%)

Options trading
(Higher STT on premium and exercise)

Corporate Promoters

Share buybacks
(Additional tax; higher effective rate for promoters) 

Direct Tax Proposals

1. New Income Tax Framework

New Income Tax Act, 2025 to come into effect from April 2026.

Simplified income tax rules and redesigned return forms for easier compliance.

2. Ease of Living for Taxpayers

Interest from Motor Accident Claims Tribunals fully exempt; TDS removed.

Single-window filing of Form 15G/15H for dividends and interest.

Time limit for revising returns extended to 31 March (from 31 December) with nominal fee.

Staggered timelines introduced for filing income tax returns.

PAN-based challan replaces TAN for NRI property purchases.

One-time six-month foreign asset disclosure scheme for small taxpayers.

3. TDS & TCS Rationalisation

TCS on overseas tour packages reduced to 2%.

TCS on LRS remittances for education and medical purposes reduced to 2%.

Simplified TDS for manpower supply to benefit labour-intensive sectors.

Automated system for obtaining lower or nil TDS certificates for small taxpayers.

4. Penalty & Prosecution Reforms

Integrated assessment and penalty orders to reduce litigation.

Taxpayers can update returns post-reassessment by paying additional 10% tax.

Immunity from penalty for misreporting income after additional tax payment.

Decriminalisation of non-production of books and minor TDS defaults.

Retrospective immunity for non-disclosure of non-immovable foreign assets below ₹20 lakh.

5. Cooperatives

Tax deduction for cooperatives supplying cattle feed and cotton seed.

Deduction for inter-cooperative dividends distributed to members.

Three-year dividend tax exemption for national cooperative federations on notified investments.

6. Boost to IT & Digital Services

IT, ITES, KPO, and software-related R&D merged into single category: Information Technology Services.

Uniform safe harbour margin of 15.5%; threshold raised from ₹300 crore to ₹2,000 crore.

Fast-tracked APA process with target of two years.

7. Attracting Global Investment

Tax holiday until 2047 for foreign companies providing cloud services using Indian data centres.

15% cost-based safe harbour for related-party data centre services.

Five-year income tax exemption for non-resident experts under notified schemes.

Exemption from MAT for non-residents paying tax on presumptive basis.

8. Other Key Measures

Buybacks taxed as capital gains for all shareholders; higher effective tax on promoters.

TCS on alcoholic liquor, scrap, minerals rationalised to 2%; tendu leaves TCS reduced to 2%.

STT increased on futures and options.

MAT reduced to 14% from April 2026; becomes final tax with limited set-off of existing MAT credit.

Indirect Tax Proposals

1. Customs Duty & Tariff Simplification

Duty-free import limit for seafood processing inputs raised to 3% of FOB value.

Duty-free imports extended for leather and synthetic footwear exports.

2. Energy Transition & Strategic Sectors

Customs duty exemption for capital goods in lithium-ion battery manufacturing.

Exemption for sodium antimonate used in solar glass production.

Duty exemption extended for nuclear power project imports till 2035.

Duty exemption on capital goods for critical mineral processing.

3. Civil, Defence & Electronics Manufacturing

Duty exemption on components/parts for civilian and defence aircraft manufacturing & MRO.

Exemption on specified parts for microwave oven production.

4. Special Economic Zones (SEZs)

One-time concessional duty window for eligible SEZ manufacturing units selling into Domestic Tariff Area (DTA), subject to limits.

5. Ease of Living for Citizens & MSMEs

Customs duty on personal imports reduced from 20% to 10%.

Customs duty exemption on 17 medicines.

Duty-free import of drugs/food for seven additional rare diseases.

6. Customs Process Reforms

Shift to minimal-intervention, trust-based customs clearance

Single digital clearance window for all regulatory agencies by FY 2026

Expansion of non-intrusive scanning using AI-based risk assessment

Customs Integrated System (CIS) to be rolled out as unified platform

7. Trusted Trade Facilitation

Duty deferral period for Tier-2 & Tier-3 AEOs extended to 30 days

Advance rulings validity extended from 3 to 5 years

Warehouse operator-centric customs framework with self-declaration & risk-based audits