Union Budget 2026-27 highlights: Key announcements from FM Nirmala Sitharaman’s speech

Union Finance Minister Nirmala Sitharaman, presenting the Union Budget 2026-27 on Sunday (February 1, 2026), made a slew of announcements focussed on infrastructure and services sector, thrust on capital expenditure, and custom duty cuts to boost exports. She said the government has chosen the path of “reforms over rhetoric”, delivering growth rate of around 7% for India.

“Since we assumed office 12 years ago, India’s economic trajectory has been marked by stability, fiscal discipline, sustained growth and moderate inflation. This is the result of conscious choices we have made, even in times of heightened uncertainty and disruption,” she said at the beginning of her speech, adding that the Prime Minister Narendra Modi-led governement has chosen “action over ambivalence, reform over rhetoric and people over populism”.

Ms. Sitharaman delivered her ninth Budget speech in the Parliament on a Sunday, a first in independent India’s history. This is also the third Budget of the BJP-led NDA government in its third term in office.

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Here’s a round-up of the key highlights from FM Sitharaman’s Budget speech

Three ‘kartavyas’ of the Govt.

Referring to the 2026 Budget being the first one prepared in the Kartavya Bhavan, Ms. Sitharaman said the Union government has three kartavyas (duties) towards people.

First kartavya: To accelerate and sustain economic growth, by enhancing productivity and competitiveness, and building resilience to volatile global dynamics.

Second kartavya: To fulfil aspirations of our people and build their capacity, making them strong partners in India’s path to prosperity.

Third kartavya:To ensure that every family, community, region and sector has access to resources, amenities and opportunities for meaningful participation. This is “aligned with our vision of Sabka Sath, Sabka Vikas,” Ms. Sitharaman said.

‘Reform Express is well on its way’

Before getting into specific proposals, the finance minister said the governement has rolled out over 350 reforms PM Modi announcement on Independence Day in 2025. “These include GST simplification, notification of Labour Codes, and rationalisation of mandatory Quality Control Orders,” she said, adding that High Level Committees have been formed to look into these.

The Centre is also working with the State Governments on deregulation and reducing compliance requirements, she added.

“The Reform Express is well on its way and will maintain its momentum to help us fulfil our kartavya,” she said.

Interventions in six areas

• Scaling up manufacturing in seven strategic and frontier sectors

• Rejuvenating legacy industrial sectors

• Creating “Champion MSMEs”

• Delivering a powerful push to Infrastructure

• Ensuring long-term energy security and stability

• Developing City Economic Regions.

₹10,000 crore investment in biopharma over next five years

Ms. Sitharaman proposed a ₹10,000 crore investment in the biopharma sector over the next five years, a move which would give a boost to the country’s pharmaceuticals industry. She also proposed interventions in six areas, including manufacturing, strategic and frontier sectors, healthcare and advanced technology.

Biopharmaceuticals, or biologics, are complex medicines manufactured from living organisms, cells, or tissues rather than through chemical synthesis.

“The Strategy will include a Biopharma-focused network with 3 new National Institutes of Pharmaceutical Education and Research (NIPER) and upgrading 7 existing ones. It will also create a network of over 1000 accredited India Clinical Trials sites,” she said, addressing the Parliament.

FY27 capital expenditure raised by about 9% to ₹12.2 lakh crore

Ms. Sitharaman announced an increase of about 9% in capital expenditure for the coming financial year, raising the allocation to ₹12.2 lakh crore “to continue the momentum”. This is aimed at continuing the momentum in infrastructure development and supporting economic growth, she said.

Capital expenditure or capex, is the money spent by the government on development or to acquire, or to upgrade machinery or assets.

India Semiconductor Mission 2.0

The FM also announced the launch of India Semiconductor Mission (ISM) 2.0 to produce equipment and materials, design fullstack Indian IP, and fortify supply chains.

“India’s semiconductor mission, 1.0 expanded India’s semiconductor sector capabilities. Building on this, we launch ISM 2.0 to produce equipment and materials, develop full-stack Indian IP, and strengthen supply chains. We will also focus on industry-led research and training centers to develop technology and a skilled workforce,” she said.

Further, Ms. Sitharaman announced the increase the outlay for the Electronics Components Manufacturing Scheme to Rs 40,000 crore.

Rare earth corridors

Ms. Sitharaman announced that the government will support the mineral-rich States of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing rare earth corridors to promote the mining, processing, research, and manufacturing of critical minerals.

This announcement arrives as China — the dominant force in rare earth production and exports — leverages its mining industry as a strategic bargaining chip in its ongoing tariff war with the U.S. While the U.S. remains the second-largest importer of Chinese rare earths after Japan, India is also heavily dependent on China for these materials.

‘Growth connectors’: Seven new high-speed rail corridors to be set up

Calling them growth connectors, Ms. Sitharaman said the high-speed rail corridors will connect Mumbai to Pune, Pune to Hyderabad, Hyderabad to Chennai, Hyderabad to Bengaluru, Chennai to Bengaluru, Delhi to Varanasi and Varanasi to Siliguri. She saisaid this is being done to develop environmentally sustainable passenger system.

Three-pronged approach to ‘champion SMEs’

Recognising Micro, Small, and Medium Enterprises (MSMEs) as a vital engine of growth, the Budget adopted a three-pronged approach to help them grow as “champions”.

This included equity support in the form of a ₹10,000 crore SME growth fund to support the growth of potential firms in the country. The allocation will help clusters of businesses to make a potential comeback. This would be a fresh impetus to companies that have weakened due to credit stress and outdated technology, she said.

She also proposed a top up to the Self-Reliant India Fund set up in 2021, with ₹2,000 crore to continue support to micro enterprises and maintain their access to risk capital.

In terms of professional support, government will facilitate Professional Institutions such as ICAI, ICSI, ICMAI to design short-term, modular courses and practical tools to develop a cadre of ‘Corporate Mitras’, especially in Tier-II and Tier-III towns, the FM said, adding that these accredited para-professionals will help MSMEs meet compliance requirements at affordable costs.

Initiatives to boost textile sector

FM Sitharaman announced an integrated programme with five sub parts to boost the labour-intensive textile sector the country. The parts include National Fibre Scheme, Textile Expansion and Employment Scheme, National Handloom and Handicraft programme, Tex-Eco Initiative, and Samarth 2.0 to modernise and upgrade the textile skilling ecosystem.

Further, she proposed the setting up of Mega Textile Parks and the Mahatma Gandhi Gram Swaraj initiative to strengthen khadi, handloom and handicrafts.

“India has the potential to emerge as a global hub for high quality, affordable sports goods. I propose a dedicated initiative for sports goods that will promote manufacturing, research and innovation in equipment design as well as material sciences,” Ms. Sitharaman added.

On renewed emphasis on Services sector

Ms. Sitharaman said the government has decided to place a renewed emphasis on the Services sector “to provide a pathway to fulfilling aspirations of a youthful India”.

With a renewed focus on the sector as a core driver of Viksit Bharat with a 10% global share by 2047, she announced a series of new initiatives:

• Setting up of a High-Powered ‘Education to Employment and Enterprise’ Standing Committee

• Existing institutions for Allied Health Professionals (AHPs) will be upgraded and new AHP Institutions established in private and Government sectors

• Building a strong Care Ecosystem, covering geriatric and allied care services.

• Launching a scheme to support States in establishing five Regional Medical Hubs.

• Setting up three new All India Institutes of Ayurveda

• Animal Husbandry: To scale up availability of veterinary professionals by more than 20,000

Promotion of exports of marine, leather, and textile products

Increase in the limit for duty-free imports of specified inputs used for processing seafood products for export, from the current 1 per cent to 3 per cent of the FOB value of the previous year’s export turnover.

Allowance of duty-free imports of specified inputs, which is currently available for exports of leather or synthetic footwear, to exports of Shoe Uppers as well.

Extension of time period for export of final product from the existing 6 months to 1 year, for exporters of leather or textile garments, leather or synthetic footwear and other leather products.

On taxes

New Income Tax Act will come into effect April 1, 2026

Moving to Part B of the Budget and direct taxes in specific, Ms. Sitharaman informed the new Income Tax Act will come into effect April 1 this year.

She added, the simplified new Income Tax rules would be notified “shortly”. “[This would be] giving adequate time to taxpayers to acquaint themselves with its requirements,” she stated, adding, “The forms have been redesigned such that ordinary citizens can comply without difficulty.”

Government to tax buybacks as capital gains

In the interest of minority shareholders, Ms. Sitharaman said buyback proceeds for all types of shareholders will be taxed as capital gains.

She said: “Change in taxation of buyback was brought in to address the improper use of buyback root by promoters, and in the interest of minority shareholders, the government will tax buybacks for all types of shareholders as capital gains.”

The Finance Minister said to incentivise misuse of tax arbitrage, the promoters will pay an additional buyback tax. “This will make effective tax 22% for all corporate promoters and for non-corporate promoters it will be 30%.”

Security Transaction Tax (STT) hike

FM Sitharaman proposed to raise the STT on futures to 0.05% from 0.02% and on options transactions to 0.15% from 0.01% earlier.

Tax holiday for foreign companies offering cloud services using India data centres

Ms. Sitharaman proposed tax holiday till 2047 for foreign companies that provide cloud services to customers worldwide by using data centres in the country. The tax holiday will be extended to the entities concerned subject to certain conditions.

“I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India,” she said.

To avail the tax holiday, companies need to provide services to Indian customers through an Indian reseller entity.

Financial sector: ‘Ease of Doing Business and Ease of Living’

• Individual Persons Resident Outside India (PROIs) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS).

• Reduce TCS rate on sale of overseas tour program package from 5% and 20% to 2% without any stipulation of amount.

• Reduce TCS for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) from 5% to 2%.

• Non-production of books of account and documents and requirement of TDS payment is decriminalised.

• Time available for revising returns extended from 31st December to up to 31st March with the payment of a nominal fee.

• Honest taxpayers willing to settle disputes will now be able close cases by paying an additional amount in lieu of penalty.

On AI and boosting new technologies in India

The finance minister highlighted the need to adopt new technologies in the 21st century and mentioned aritificial intelligence 11 times in her speech which is the highest ever for an FM’s Budget speech in India:

• Governance: Serving as a force multiplier for improved public service delivery.

• Supporting new technologies: Adopting new technologies in various sectors through the AI Mission and National Quantum Mission.

• Labour market analysis: Assessing the impact of emerging tech such as AI on job roles and skill requirements.

• Bharat-VISTAAR: A new multilingual AI tool designed for broader linguistic accessibility.

• Agriculture: Integration with AgriStack portals and ICAR agricultural practice packages.

• Healthcare & accessibility: R&D and integration into assistive devices for People with Disabilities manufactured by Artificial Limbs Manufacturing Corporation of India (ALIMCO).

• Customs & security: Expanding non-intrusive scanning and advanced imaging for risk assessment.

• Education: Embedding AI modules directly into the national education curriculum from school level onwards and for teacher training.

• Professional development: Upskilling and reskilling programs for engineers and tech professionals.

• Employment matching: AI-enabled platforms to connect workers with jobs and training opportunities.

Compiled by Vibha B. Madhava