EXPECTATIONS FROM UNION BUDGET FY 2026-27

India has transitioned into a defining era—the age of Bharat—where the pillars of Atmanirbhar Bharat (Self-Reliant India) have shifted from aspiration to economic reality. Driven by a robust GDP growth rate of 7.4%, India is currently outperforming its global peers and solidifying its position as a primary engine of world economic growth.

The upcoming Union Budget 2026-27 stands as the most critical driver of this trajectory. It serves as a strategic roadmap, detailing where public spending will be directed to unlock new engines of inclusive growth while providing a transparent view of the nation’s fiscal health.

Below is an analysis of the key reforms and sector-specific expectations poised to strengthen India’s economic foundation.

1. Direct Tax Reforms:

• Interest Deduction under Section 24(b): The cap on interest deductions for self-occupied properties may rise, easing burdens for individual taxpayers.
• Joint Taxation for Married Couples: A new joint filing option could simplify compliance and unlock added benefits.
• Foreign Tax Credit at TDS Stage: Claiming FTC during TDS deduction—rather than only at return filing—addresses a longstanding gap.
• ESOP Taxation for Relocated Employees: Clear rules are needed for perquisite taxation on vesting, especially for those partially in India during the period.
• Enhanced Depreciation for Manufacturing: Beyond initial-year benefits, extended depreciation in later years would counter higher wear-and-tear in this vital sector.
• AI and Robotics Tax Incentives: Building on 2025’s focus, fresh benefits for AI, robotics, and space tech would elevate India’s global edge.
• EV Car Perquisite Valuation: Update Section 17 and Rule 3 to fit electric vehicles, moving beyond outdated engine-capacity metrics.
• Capital Gains on Contingent Consideration: M&A deals often hinge on future performance; explicit tax rules for such gains are overdue.
• Section 80JJAA Relaxation: Amid tepid job growth, easing this employment-linked deduction would spur hiring.
• Further Decriminalization: Extending 2025’s TCS-related decriminalization to more provisions would streamline enforcement.

2. Indirect Tax Reforms:

• GST Simplification: Post-GST 2.0’s success in revenue and compliance, expect tweaks to Input Tax Credit for smoother cash flow and business ease.
• Customs Litigation Digitalization: Faster resolutions and digital tools would boost importer confidence and trade efficiency.
• Tariff Structure Alignment: Streamlined, globally synced tariffs would cut complexity for importers and exporters.
• Export Rule Liberalization: Incentives amid geopolitical flux could sharpen competitiveness and balance trade.
• Expanded Advance Rulings: Broader scope would slash litigation, costs, and delays in tricky customs cases.

3. Real Estate Boost:

• Lower stamp duties and an affordable housing threshold up to ₹75–90 lakh to ignite demand.
• Single-window approvals, stalled-project fixes, and ‘infrastructure status’ for cheaper, long-term funding.

4. Fostering Global Ties:

• Easing FDI hurdles, tech transfers, and collaborations to draw global firms.
• Optional presumptive tax for foreign players in tech consultancy, e-commerce, digital services, management, and software.

5. AI and Robotics Push:

• Production-linked incentives and infra support extended to AI, robotics, and deep-tech.
• Beefed-up digital/compute infrastructure for AI rollout.
• AI integration in healthcare, logistics, education, and public services.

6. Manufacturing and MSME Support:

• Subsidies on raw materials/machinery and export perks for global competitiveness.
• MSME priorities: Quicker credit access, robust guarantees for new/informal borrowers, and rural scheme delivery.

7. Climate Action and Green Energy:

• Scale solar manufacturing to cut imports; enhance grid storage for reliability.
• Advance green hydrogen and clean industrial fuels.
• Clean Mobility: EV charging beyond metros, local battery production/recycling, and public transport synergies.

8. Defense Allocation Surge:

• Bigger outlays for homegrown production and subsidies.
• Tie-ups with infra and advanced manufacturing; slash import reliance.

9. R&D Investment:

• Ramp up public funding for innovation hubs and applied research.
• Industry-academia-startup partnerships focused on commercializing outputs.

10. Healthcare Advances:

• Cut customs duties on key drugs, therapies, robotics, and radiotherapy gear.
• PLI infra boosts for more beds, rural facilities, and telemedicine.
• Pharma/device PLI 2.0, R&D incentives, and GST tweaks to curb imports.