The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, sets a clear direction for India’s next phase of growth balancing fiscal consolidation with strong public investment, structural reforms and ease of living for taxpayers. Anchored around the vision of Viksit Bharat, the Budget focuses on manufacturing expansion, MSME growth, infrastructure push, tax simplification and targeted relief for individuals and businesses.

Union Budget 2026 Key Highlights:

Major Growth-Oriented Announcements

Manufacturing & Strategic Sectors

Union Budget 2026 places strong emphasis on scaling up domestic manufacturing through targeted sectoral interventions:

• Biopharma SHAKTI with an outlay of ₹10,000 crore to develop India as a global hub for biologics and biosimilars.
• India Semiconductor Mission 2.0 to strengthen equipment manufacturing, full-stack IP development and supply chains.
• Enhanced outlay of ₹40,000 crore for the Electronics Components Manufacturing Scheme.
• Dedicated Rare Earth Corridors in mineral-rich states to reduce import dependence.
• Launch of new Chemical Parks, Hi-Tech Tool Rooms, Container Manufacturing Scheme (₹10,000 crore) and advanced construction equipment support.

MSMEs & Small Businesses

Recognising MSMEs as growth engines, the Budget introduces targeted support:

• ₹10,000 crore SME Growth Fund to build “Champion MSMEs”.
• ₹2,000 crore top-up to the Self-Reliant India Fund for micro enterprises.
• Mandatory use of TReDS by CPSEs for MSME procurement, along with credit guarantee support and secondary market development for receivables.
• Introduction of ‘Corporate Mitras’ trained professionals to assist MSMEs with compliance at affordable costs.

Infrastructure & Urban Development

• Continued focus on Tier-II and Tier-III cities.
• Infrastructure Risk Guarantee Fund to support private developers.
• New Dedicated Freight Corridors, expansion of National Waterways, coastal cargo promotion and seaplane connectivity.
• Development of City Economic Regions (CERs) with ₹5,000 crore per region over five years.
• Announcement of seven high-speed rail corridors connecting major growth centres

Direct Tax Highlights – Big Relief for Taxpayers

New Income Tax Framework

• Income Tax Act, 2025 to come into effect from 1 April 2026, replacing the old 1961 Act.
• Simplified tax rules and redesigned forms aimed at easier compliance for ordinary taxpayers

Key Relief Measures for Individuals & Middle Class

• Interest awarded by Motor Accident Claims Tribunal to individuals made fully tax-exempt.
• TCS on overseas tour packages reduced to 2%.
• TCS under LRS for education and medical purposes reduced to 2%.
• Extended timeline for revising income tax returns till 31 March with nominal fee.
• Staggered ITR filing timelines to reduce last-minute pressure.
• One-time foreign asset disclosure scheme for small taxpayers with immunity from prosecution, subject to conditions

Measures to Reduce Litigation & Ease Compliance

• Assessment and penalty proceedings will be combined into a single order to avoid multiple cases for the same issue.
• No interest will be charged on penalty amounts during the appeal period before the first appellate authority, regardless of the appeal outcome.
• Pre-deposit for filing appeals reduced from 20% to 10%, calculated only on the core tax demand.
• Taxpayers will be allowed to update their returns even after reassessment starts, by paying an additional 10% tax, and authorities will rely only on this updated return.
• The existing immunity from penalty and prosecution framework will now apply to misreporting cases as well, subject to payment of 100% additional tax.
• Penalties for technical defaults (such as audit-related lapses and reporting failures) will be converted into fees.
• The prosecution framework under the Income Tax Act will be rationalised, while retaining strict action for serious offences.
• Non-production of books of accounts and TDS-related defaults where payment is made in kind will be decriminalised.
• Minor offences will attract only monetary fines, not prosecution.
• Serious offences will be graded based on the severity of default, with maximum imprisonment reduced to two years, and courts empowered to convert imprisonment into fines.
• Taxpayers who failed to disclose foreign assets (other than immovable property) below ₹20 lakh will get immunity from prosecution, with retrospective effect from 1 October 2024.

Boost for IT & Services Sector

• All IT-related services clubbed under “Information Technology Services” with a uniform safe harbour margin of 15.5%.
• Safe harbour threshold increased from ₹300 crore to ₹2,000 crore.
• Automated approval and 5-year continuity for safe harbour options, significantly improving tax certainty for IT companies.

Indirect Tax Highlights

On the indirect tax front, the government continued its focus on simplification and certainty rather than major rate changes:

• Emphasis on GST simplification as part of the broader reform agenda.
• Rationalisation of procedures and reduction in compliance burden to support businesses, especially MSMEs.
• Continued alignment of indirect tax policy with the “Reform Express” initiative aimed at improving competitiveness and ease of compliance.
• Rationalisation of indirect tax provisions relating to Special Economic Zones (SEZs) to improve their global competitiveness.
• SEZ reforms aimed at supporting exports, manufacturing and integration with global supply chains.

What This Budget Means for Taxpayers & Businesses

• Middle-class taxpayers benefit from simpler tax laws, lower TCS rates, extended compliance timelines and reduced litigation.
• Businesses and MSMEs gain from easier access to capital, faster receivables financing, infrastructure expansion and tax certainty.
• Large corporations and investors benefit from stable fiscal policy, infrastructure push and manufacturing-linked incentives.
• Service and IT sectors receive long-term clarity through rationalised transfer pricing and safe harbour norms.

Conclusion

The Union Budget 2026 signals continuity with reform, discipline and growth, while placing strong emphasis on ease of living, ease of doing business and long-term competitiveness. With a clear roadmap for fiscal consolidation, manufacturing leadership, MSME empowerment and tax simplification, the Budget lays a solid foundation for India’s journey towards Viksit Bharat in the coming decade.