The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, marks a pivotal moment in India’s journey toward Viksit Bharat. Against a backdrop of global supply chain disruptions, the budget emphasizes fiscal prudence, targeting a fiscal deficit of 4.3% of GDP, while simultaneously pushing for aggressive structural reforms and domestic manufacturing.

This roadmap balances ambitious infrastructure outlays with a simplified tax regime, aiming to transition India into a high-tech, services-led global economy.

Capital Markets & Investing

The budget introduces specific measures to curb tax arbitrage and regulate the flow of foreign capital while adjusting the cost of trading in the derivatives segment.

  • Securities Transaction Tax (STT) Hike:
    • Futures: Increased to 0.05% (from 0.02%).
    • Options: Increased to 0.15% on premium and exercise (from 0.1% and 0.125%).
  • Buyback Taxation: Buybacks will now be taxed as Capital Gains for all shareholders.
    • Corporate Promoters: Effective tax rate of 22%.
    • Other Promoters: Effective tax rate of 30%.
  • Foreign Investor (PROI) Limits: Individual limits for Persons Resident Outside India (PROI) in listed equity are increased from 5% to 10%, with an overall investment limit for all individual PROIs to 24%, from the current 10%. 

Infrastructure & Capex

The government continues its heavy lifting in infrastructure to maintain economic momentum and improve urban efficiency.

  • Capex Outlay: The public capital expenditure is hiked to ₹12.2 lakh crore for FY 2026-27.
  • Tier II & III Focus: Massive infrastructure push for cities with over 5 lakh population, including the mapping of City Economic Regions (CER) with an allocation of ₹5,000 crore per CER.

High-Speed Rail: In order to promote environmentally sustainable passenger systems development of  seven High-Speed Rail corridors between cities as ‘growth connectors’ is proposed, namely i) Mumbai-Pune, ii) Pune-Hyderabad, iii) Hyderabad-Bengaluru, iv) Hyderabad-Chennai, v) Chennai-Bengaluru, vi) Delhi-Varanasi, vii) Varanasi-Siliguri.

Direct Tax Reforms

A significant overhaul of the taxation landscape is set to take place, providing clarity and ease of compliance for individual and corporate taxpayers.

  • New Income Tax Act 2025: Effective April 1, 2026, this Act is expected to simplify rules and redesign forms to reduce litigation.
  • Foreign Asset Disclosure Scheme: A one-time, 6-month window is introduced for small taxpayers (students, professionals, and NRIs).
    • Category A (Undisclosed up to ₹1 Cr): Taxpayers pay 30% of Fair Market Value of the asset or 30% of the undisclosed income as tax+ 30% additional tax in lieu of penalty for full immunity from prosecution.
    • Category B (Disclosed but undeclared assets up to ₹5 Cr): Immunity from both penalty and prosecution will be available with the payment of a fee of ₹1 lakh.
  • TCS Rationalization: Tax Collection at Source (TCS) for overseas tour packages and Liberalized Remittance Scheme (LRS) for education/medical purposes is reduced from 5% and 20% to a flat 2%.

Sectoral Allocations: Strategic & Frontier Industries

To reduce import dependency, the budget provides significant financial backing to sunrise sectors.

Sector/SchemeAllocationObjective
Biopharma SHAKTI₹10,000 Cr over the next 5 yearsDomestic production of biologics and biosimilars.
Electronics Components₹40,000 CrCapitalizing on the momentum of the 2025 manufacturing scheme, which already had an outlay of ₹22,919 crore.
SME Growth Fund₹10,000 CrCreating “Champion MSMEs” through equity support.
Semiconductor Mission 2.0StrategicFocus on equipment, materials, and Indian IP.
Container Manufacturing₹10,000 Cr over 5 yearsCreating a globally competitive ecosystem over 5 years.

Financial Sector & Sustainability

The government is restructuring public financial institutions.

  • Public NBFC Restructuring: A strategic merger/restructuring of Power Finance Corporation Ltd. and Rural Electrification Corporation (REC Ltd.) to improve efficiency.
  • Carbon Capture Utilization and Storage (CCUS): An outlay of ₹20,000 crore over 5 years to implement CCUS technologies in power, steel, cement, refinery and chemical sectors.
  • Conservation: India will host the first-ever Global Big Cat Summit, involving 95 range countries to conserve and inspire collective responsibility towards preserving ecosystems that support species like tigers, lions, leopards and other big cats.

In Closing

The Union Budget 2026-27 is a definitive statement of intent, prioritizing Yuva Shakti (Youth Power) and technological self-reliance. By simplifying the direct tax code and recalibrating capital gains on buybacks, the government might be seeking a more transparent investment environment. While the hike in STT may impact high-frequency traders, the massive ₹12.2 lakh crore capex and the focus on frontier sectors like Biopharma and Semiconductors provide a robust long-term tailwind for the Indian economy.