InCred Q1 FY27 Profit Jumps 83% Ahead of ₹4,000 Cr IPO

The Union Budget 2026-27 focuses on strengthening India’s long-term economic growth by increasing investment in infrastructure, supporting businesses, and maintaining fiscal discipline. Along with major announcements for manufacturing, technology, tourism, healthcare, and MSMEs, the government has also clarified that there is no proposal to remove the Long-Term Capital Gains (LTCG) tax on equity investments.

The budget also reflects the government’s efforts to balance economic growth with responsible borrowing. With higher capital spending, lower fiscal deficit targets, and sector-specific initiatives, the government hopes to create jobs, improve infrastructure, and attract more investments in the coming years.

Government Focuses on Capital Spending and Fiscal Discipline

One of the biggest highlights of the Union Budget 2026-27 is that the government’s effective capital expenditure has crossed its fiscal deficit for the first time. Effective capital expenditure has been set at ₹17.1 lakh crore, while the fiscal deficit is estimated at ₹16.9 lakh crore. This signals a stronger focus on creating long-term assets such as roads, railways, airports, and public infrastructure instead of depending heavily on borrowed funds for regular expenses.

The government has set the fiscal deficit target at 4.3% of GDP, slightly lower than 4.4% in the previous financial year. The revenue deficit has been kept at 1.5%, while India’s nominal GDP is expected to grow by 10% during 2026-27.

Brand PostAccesco Living Builds 25,000+ Waitlist Ahead of Bengaluru Launch, Bets on Household Demand…BusinessTVS Leads EV Scooter Market as Ola Electric Slips in July

The Centre has also announced its long-term goal of reducing outstanding liabilities to 50% of GDP by 2031. Currently, liabilities are estimated at 55.6% of GDP. However, interest payments remain a significant challenge, accounting for 26% of total government expenditure and nearly 40% of revenue receipts.

On the taxation front, the Finance Ministry has put an end to speculation by confirming that there is no proposal to abolish the Long-Term Capital Gains (LTCG) tax on equity investments. It has also clarified that taxpayers cannot claim the Section 87A rebate against capital gains income.

The budget also includes changes to the Securities Transaction Tax (STT). The STT on options has been increased from 0.1% to 0.15%, while futures will now attract 0.05%, up from 0.02%. Additionally, all share buybacks will now be taxed as capital gains, resulting in an effective tax rate of 22% for corporate promoters and 30% for non-corporate promoters.

There has been no change in income tax slabs for the 2026-27 assessment year. However, the government has reduced the Tax Collected at Source (TCS) to 2% on overseas tour packages and remittances exceeding ₹10 lakh for medical or education purposes.

Corporate taxation has also seen some relief, with the Minimum Alternate Tax (MAT) reduced from 15% to 14%. In another significant move, foreign companies providing global cloud services through Indian data centres will receive a tax holiday until 2047, a step aimed at encouraging digital infrastructure investments.

Manufacturing, MSMEs and Sector-Wise Announcements

The government has decided to discontinue the $23 billion Production-Linked Incentive (PLI) scheme, which was originally introduced to strengthen domestic manufacturing. According to official assessments, participating companies had achieved only 37% of their production targets by October 2024, while less than 8% of the allocated funds had been released due to implementation delays and administrative hurdles.

Instead of continuing the scheme in its current form, the government is now exploring alternative methods, including reimbursing investments in selected sectors to encourage manufacturing growth.

For small businesses, the budget introduces a new SME Growth Fund with an allocation of ₹10,000 crore. The initiative aims to develop “Champion SMEs” by improving their access to capital and reducing cash-conversion cycles.

The technology sector has also received a boost. The allocation for the Electronics Component Manufacturing Scheme has been increased to ₹40,000 crore, while Semiconductor Mission 2.0 has been announced to strengthen India’s semiconductor ecosystem. Industry stakeholders had also sought wider ESOP tax benefits and stronger AI computing infrastructure to support startup growth.

Infrastructure and tourism remain another major focus area. The government plans to develop seven high-speed rail corridors connecting major cities and build 120 new regional airports under the UDAN scheme. In addition, ₹20,000 crore has been allocated to help states improve infrastructure at major tourist destinations.

Healthcare and climate initiatives have also received dedicated funding. The Biopharma SHAKTI scheme has been allocated ₹10,000 crore to support domestic biologics manufacturing, while another ₹20,000 crore will be invested over five years in Carbon Capture, Utilisation and Storage (CCUS) projects to support India’s climate goals.

Budget Signals Long-Term Growth Strategy

Overall, the Union Budget 2026-27 presents a balanced approach that combines fiscal responsibility with long-term economic development. While there are no major changes in personal income tax, the government has focused on improving infrastructure, supporting MSMEs, strengthening manufacturing, promoting advanced technology, and encouraging investments in sectors such as semiconductors, healthcare, and tourism.

The clarification on LTCG tax removes uncertainty for investors, while the continued emphasis on capital expenditure reflects the government’s strategy of building productive assets to support future growth. At the same time, measures such as a lower MAT rate, reduced TCS on select overseas remittances, and support for cloud infrastructure indicate an effort to improve India’s business environment.

With targeted spending across key sectors and a roadmap to reduce fiscal liabilities over the coming years, the Budget 2026-27 aims to maintain economic stability while laying the foundation for sustained growth and investment.