The Union Budget 2026-27 prioritises long-term growth by raising capital spending,supporting businesses and maintaining fiscal discipline. The government made targeted announcements for manufacturing,technology,tourism,healthcare and MSMEs,and confirmed there is no proposal to abolish the Long‑Term Capital Gains (LTCG) tax on equity investments.
Capital Spending,Deficit Targets and Debt Outlook
Effective capital expenditure is projected at ₹17.1 lakh crore,slightly higher than the fiscal deficit of ₹16.9 lakh crore. This marks a shift toward creating durable public assets such as roads,railways,airports and urban infrastructure.
The fiscal deficit target for 2026-27 is set at 4.3% of GDP,down from 4.4% last year. The revenue deficit is pegged at 1.5% while nominal GDP is expected to grow around 10% for the year.
The Centre aims to reduce outstanding liabilities to 50% of GDP by 2031 from the current 55.6%. Interest payments remain a pressure point,accounting for about 26% of government expenditure and nearly 40% of revenue receipts.
Tax Measures and Market Levies
The Finance Ministry clarified taxpayers cannot claim Section 87A rebate against capital gains and that LTCG on equities will remain intact. Securities Transaction Tax (STT) on options rises to 0.15% from 0.1%,and STT on futures increases to 0.05% from 0.02%.
Share buybacks will be taxed as capital gains,effectively imposing a 22% rate for corporate promoters and 30% for non‑corporate promoters. Income tax slabs remain unchanged for the assessment year 2026-27. Tax Collected at Source (TCS) has been lowered to 2% on overseas tour packages and on remittances above ₹10 lakh for medical or education purposes.
Corporate relief includes a cut in Minimum Alternate Tax (MAT) from 15% to 14%. Foreign firms delivering global cloud services from Indian data centres will enjoy a tax holiday until 2047 to spur digital infrastructure investments.
Industry,MSMEs and Infrastructure
The government will wind down the $23 billion Production‑Linked Incentive (PLI) scheme after finding limited achievement of targets and slow fund disbursal. Alternatives under consideration include reimbursing investments in select sectors to boost local manufacturing.
A new SME Growth Fund with ₹10,000 crore aims to create “Champion SMEs” by improving access to capital and easing working capital cycles. Electronics component manufacturing allocation rises to ₹40,000 crore and a Semiconductor Mission 2.0 is announced to strengthen chip-making capabilities.
Plans include seven high‑speed rail corridors,120 regional airports under UDAN and ₹20,000 crore for tourism infrastructure. Health and climate measures feature a ₹10,000 crore Biopharma SHAKTI allocation and ₹20,000 crore over five years for Carbon Capture,Utilisation and Storage projects.
Outlook
The Budget balances fiscal prudence with strategic investments aimed at job creation,improved infrastructure and higher private investment. Clear policy signals on taxation and targeted support for key sectors seek to bolster investor confidence and long‑term growth prospects.