Union Budget 2026: What To Expect This Time?

• Middle-class relief may deepen, with possible enhancements to the new income tax regime 2026, extending effective zero-tax income beyond ₹12 lakh.

• Infrastructure and defence spending are expected to rise by 10–15%, reinforcing India’s manufacturing and logistics competitiveness.

• Jobs, MSMEs, and exports remain central, with large credit guarantees and skilling initiatives likely to anchor long-term growth.

India’s economy continues to show resilience, growing at an estimated 6.8–7.2% annually, even amid global uncertainty. Against this backdrop, the union budget 2026 is expected to play a pivotal role in steering India toward its long-term vision of Viksit Bharat 2047. The budget will focus on sustaining growth momentum while balancing fiscal discipline, inclusive development, and private sector participation.

Finance Minister Nirmala Sitharaman is set to present her 9th Union Budget on February 1, 2026, at 11:00 AM IST. The Economic Survey, tabled a day earlier on January 31, will outline macroeconomic conditions and policy priorities. As always, special trading sessions on BSE and NSE will capture immediate market reactions.

Budget 2026 expectations centre on middle-class tax relief, infrastructure-driven growth, and employment generation. The government is also expected to keep the fiscal deficit near 4.3% of GDP, in line with projections by rating agencies such as ICRA.

ax reforms were the headline grabbers in Budget 2025, especially after income up to ₹12 lakh became effectively tax-free under the new regime. In union budget 2026, experts do not anticipate drastic changes, but rather calibrated fine-tuning to increase disposable income and boost consumption.

1. New income tax regime 2026 upgrades

One of the most anticipated changes is an increase in the standard deduction from ₹75,000 to ₹1 lakh. If implemented, this could extend the zero-tax threshold beyond ₹12 lakh for many salaried individuals, improving take-home pay without adding compliance burdens.

There is also speculation around easing ULIP taxation norms and capping dividend taxation at 20%, down from the current peak rates. Such moves would align India’s tax structure more closely with global investment practices.

2. Capital markets relief

Market participants expect rationalisation of securities transaction tax (STT), either through partial abolition or allowing it as a deductible expense. There is also growing demand to recalibrate LTCG taxation back to the 10–15% range to encourage long-term investing.

Additionally, partnership firms and LLPs may see reduced tax rates or concessional regimes, improving ease of doing business and formalisation of enterprises.

3. Compliance and retirement

Simplifying income tax return (ITR) forms, reducing AI-driven scrutiny, and streamlining audits are key expectations. On the retirement front, higher contribution limits for NPS and VPF may be announced, aligning with the Economic Survey’s emphasis on pension penetration and retirement security.

4. Indirect taxes

GST rationalisation remains on the agenda, though major slab mergers seem unlikely this year. Instead, targeted relief, such as lower GST on textbooks and rationalised rates for food and beverage services is expected. EV components may continue at a uniform 5% rate to support clean mobility.

Also Read: What are the expectations from various sectors after Union Budget 2026?

The Union Budget 2026 is scheduled to be presented on February 1, continuing the long-standing tradition of outlining the government’s fiscal roadmap at the start of the financial year. The budget will set the tone for policy priorities, public spending, and reform measures for FY 2026–27.

This year’s budget is expected to place strong emphasis on growth-oriented spending, with infrastructure remaining central to the government’s economic strategy. Higher capital expenditure and targeted sectoral support are likely to play a key role in sustaining momentum across core industries.

Infrastructure is expected to remain the backbone of India’s growth agenda, with capital expenditure projected to rise by 8–10%, potentially crossing ₹12 lakh crore. The focus is likely to be on strengthening connectivity, improving logistics efficiency, and supporting urban and green development.

Roads and highways

Allocations could exceed ₹2.5 lakh crore, with renewed thrust on flagship programmes such as Bharatmala and PM Gram Sadak Yojana IV. Enhanced rural and inter-city connectivity is expected to support demand for cement, steel, and generate construction-led employment.

Railways overhaul

Railway capital expenditure may reach around ₹2.65 lakh crore, funding new freight corridors, expansion of Vande Bharat trains, and advanced safety systems like Kavach 4.0. These measures could improve logistics efficiency and reduce freight costs by nearly 10%.

Urban and smart cities

Urban infrastructure is likely to see sustained investment through metro rail projects, AMRUT 2.0 water initiatives, and PMAY 2.0 housing targets. The rollout of multi-modal logistics parks is also expected to gather pace, supporting urban mobility and supply chains.

Energy and green infrastructure

Renewable energy, battery energy storage systems, and nuclear power are expected to receive strong policy support. Reforms worth nearly ₹1 lakh crore may focus on improving power distribution efficiency and strengthening the financial health of the energy sector.

The union budget 2026 is expected to prioritise sectors that generate jobs, boost exports, and reduce import dependence.

1. Defence powerhouse

Defence spending could cross ₹6.5 lakh crore, driven by indigenisation, private sector participation, and exports. Maintenance, repair, and overhaul (MRO) hubs may attract global contracts.

2. Semiconductors and electronics

PLI 2.0, duty rationalisation, and logistics support could strengthen India’s electronics ecosystem, especially in chips, displays, and memory manufacturing.

3. Healthcare transformation

Increased allocation for maternal and child health, expanded Ayushman Bharat coverage, and nationwide cancer screening programmes may significantly improve healthcare outcomes.

4. EVs and renewables

Continued incentives across the EV value chain, uniform GST, and sovereign green bonds are expected to accelerate clean energy adoption.

Employment and MSMEs remain core priorities, with policy support aimed at creating nearly 2 crore jobs annually.

1. Employment surge

Large-scale internship programmes, faster labour code implementation, and social security for gig workers may reshape the labour market.

2. MSME lifeline

Credit guarantees up to ₹5 lakh crore, tech adoption incentives, and FPO clusters could enhance MSME competitiveness and rural incomes.

3. Exports acceleration

Export missions, interest subvention, and BharatTradeNet funding may help Indian exporters navigate global trade disruptions.

4. Gold and niche segments

Possible revival of Sovereign Gold Bonds and shorter holding period norms for gold ETFs may attract retail investors.

Union Budget 2026 is expected to focus on growth while maintaining fiscal discipline. Planning ahead can help investors and taxpayers respond with clarity and confidence.