What to Expect in the Union Budget 2026-27

The Union Budget has a huge impact on the Indian financial market. It outlines fund allocations and policy frameworks for various market sectors, tax regulations, and other administrative rules that have a huge impact on businesses. The policies for this financial year are expected to focus on stability, targeted incentives, and long-term development. It is important for companies, investors, and households to see if their union budget expectations around growth, taxes, and sector support are fulfilled.

Key Expectations from the Union Budget 2026  

Individuals and companies may get some indications of the Indian government’s priorities from the Economic Survey to be released on January 31. Here's what to expect from the union budget of FY 2026-27. 

Tax and Policy Expectations

• Industry associations are looking for policy interventions and GST rationalisation to enhance ease of doing business.  
• There are no expected changes in the income tax slabs, as the new Income Tax Act will come into effect from April 1, 2026.  
• The attention could be on a smooth transition to the new taxation law and the removal of outdated sections.  
• Certain experts feel that there is a need for further tax rationalisation to counter the impact of inflation on the middle class.  
• This may include a rise in the standard deduction to ₹1,00,000 and an improvement in the tax slab by 30%. This may include a rise in the standard deduction to ₹1,00,000 and an improvement in the tax slab by 30%. 

Trade, Investment, and Capital Markets  

• Given the pressure on the rupee and trade tensions with the US, developments on export support and import substitution policies are being closely watched.  
• With the rupee under pressure and trade tensions with the US, experts are expecting measures to support exports and import substitution.  
• Steps to attract higher foreign portfolio investment (FPI) are also expected.  
• Investment firms are looking for clarity on transaction taxes and long-term capital gains.  
• Stakeholders want simpler capital gains rules with uniform holding periods and tax rates across asset classes.   

Duties, Manufacturing, and MSMEs  

• Experts expect calibrated customs duty changes aligned with the Make in India and China+1 strategies.  
• There may be duty relief on key raw materials to support MSMEs, manufacturing, electronics, and green energy.  
• Selective duty hikes on finished goods are also expected to boost domestic production.  
• Support is anticipated for EVs, solar equipment, defence manufacturing, and semiconductors.  
• Rationalisation of inverted duty structures remains a key demand.  

Dispute Resolution and Deductions  

• There is strong demand for a one-time tax dispute resolution scheme like ‘Vivad se Vishwas’.  
• The move could unlock over ₹1.5 lakh crore stuck in litigation across nearly 38,000 cases.  
• Experts are also seeking an increase in the Section 80C limit, unchanged at ₹1.5 lakh since 2014.  
• Higher deductions under Section 80D for health insurance, especially for senior citizens, are also expected.   

Capital Gains and Corporate Tax  

• Stakeholders want a higher exemption limit for long-term capital gains on equities, from ₹1.25 lakh to ₹2 lakh.  
• There are also suggestions to review indexation benefits for real estate and debt investments.  
• Financial analysts expect corporate tax rates to remain stable.  
• They also anticipate targeted incentives for startups, green energy, digital infrastructure, and manufacturing.  

Union Budget 2026-27: Key Sector Highlights 

The Union Budget 2026-27 outlines the government’s plans to ensure economic growth and overall social development. The planned measures for this financial year aim to strengthen MSMEs and real estate, alongside tax rationalisation and employment generation. These sector-wise measures reflect overall union budget expectations.  

Expectations from the Education Sector  

• The education sector expects higher budget allocation.  
• Focus is on rural and semi-urban infrastructure.  
• Better internet access is a key demand.  
• Smart classrooms and digital tools are needed.  
• EdTech partnerships with IITs and IIMs are expected.  
• Skill-based and industry-ready education is a priority.  

Expectations from the MSME Sector  

• MSMEs want simpler tax rules.  
• Lower compliance burden is expected.  
• Easy access to credit is a major need.  
• Government-backed loan schemes are important.  
• Skill development programs are required.  
• Productivity and competitiveness need support.  

 Expectation on Duties and Tax Relaxation  

• Industries seek duty rationalisation.  
• Lower taxes can reduce cost pressure.  
• Taxpayers expect higher exemption limits.  
• Middle-class tax relief is anticipated.  
• GST cuts on essential inputs are requested.  
• Lower costs may boost consumption.  

 Infrastructure and Construction  

• Higher infrastructure spending is expected.  
• Public projects can create more jobs.  
• Better roads and transport are needed.  
• Urban development is a key focus.  
• Lower construction costs are expected.  
• Private investment needs policy support.   

Electric Vehicles and Clean Mobility  

• EV adoption needs continued support.  
• Lower duties on EV components are expected.  
• Battery cost reduction is a key demand.  
• Charging infrastructure needs expansion.  
• Domestic EV manufacturing is a priority.  
• Clean mobility aligns with sustainability goals.