Summary of this article
Budget 2026 focuses on Viksit Bharat and fiscal discipline.
New Income Tax Act 2025 to begin April 2026.
Major push for manufacturing, MSMEs, education and tourism.
Union Minister of Finance Nirmala Sitharaman presented the Union Budget 2026 on February 1, 2026 focussing on the theme of Viksit Bharat, with particular emphasis on stability, fiscal discipline, sustained growth and moderate inflation. She said the government’s aim was to transform aspiration into achievement and potential into performance. In view of the volatile geopolitical situation, she also spoke on energy security, including schemes for rare earth research and mining, domestic manufacturing capacity (including tax reforms to the manufacturing sector), and a three-pronged approach to boost MSME growth, among others.
Here are the highlights of the Budget
1. New Income Tax Act 2025 from April 1, 2026
Sitharaman announced that the new Income Tax Act 2025 will be implemented from April 1, 2026 and new rules and income tax return (ITR) forms for the same will be announced shortly.
She said in her Budget Speech: “The Income Tax Act, 2025, will come into force from 1 April 2026. The simplified income tax rules and forms will be notified soon, giving taxpayers adequate time to familiarise themselves with the requirements."
However, no change in tax rates have been announced. The new Act, she said, focuses on simplifying direct tax provisions, removing ambiguities, and reducing risks of litigation. Compared with the 1961 Income Tax Act, the new Act reduces the sections by about 50 per cent.
The legislation also introduces a single “tax year” framework, thus eliminating the distinction between the assessment year and previous year. It also allows taxpayers to claim tax deducted at source (TDS) refunds even if ITRs are filed after the deadline, without any penal charges.
Individual taxpayers filing ITRs with ITR 1 and ITR 2 returns will continue to file till July 31 and non-audit business cases or trusts have been proposed to be allowed time till August 31. Also, the time available for revising returns has been extended from December 31 to up to March 31 with the payment of a nominal fee.
2. High-Level Banking Review Committee Under Viksit Bharat Vision
The Union Budget 2026 also proposed to set up a high-level committee for review and reform of the banking sector under the Viksit Bharat framework. The committee will conduct a detailed review of the banking sector to test its structure, inclusion commitment, efficiency and resilience. It will study the ability of banks to meet the future credit requirements and foster the growth of the economy and also examine governance standards and risk management practices in view of changing financial and technological conditions.
To give a boost to public sector non-banking financial companies, Budget 2026 has proposed restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). These steps are aimed at improving their ability to offer credit back up to the power and infrastructure sectors, respectively.
3. Tax Proposals For Financial Sector
Sitharaman said the government planned to raise the securities transaction tax on futures from 0.02 per cent to 0.05 per cent. STT on option premiums and exercise of options will be raised from 0.10 per cent 0.125 per cent to 0.15 per cent.
4. For NRIs
Individual persons resident outside India (PROIs) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS). Also, TDS on the sale of immovable property by a non-resident will have to be deducted and deposited through the resident
buyer’s Permanent Account Number (PAN) instead of TAN. The Budget also announced an exemption from Minimum Alternate Tax (MAT) to all non-residents who pay tax on a presumptive basis.
5. Education Sector
The Budget also announced a number of measures to strengthen higher education The proposals include setting up five University Townships in the vicinity of major industrial and logistic corridors, girls’ hostel in Higher Education STEM institutions in every district of the country under the She MARTS scheme, and telescope infrastructure facilities to boost education in astrophysics and astronomy.
She also announced that the government planned to set up a National Institute of Hospitality as a bridge between academia, industry and the Government for the tourism sector. She also announced a pilot scheme for upskilling 10,000 guides in 20 iconic tourist sites.
6. Customs Duty On Personal Imports Reduced From 20 Per Cent To 10 Per Cent
The Budget also introduced significant relief for individual consumers by halving the customs duty on goods imported for personal use. Sitharaman said that to rationalise the customs duty structure for goods imported for personal use, she proposed “to reduce the tariff rate on all dutiable goods imported for personal use from 20 per cent to 10 per cent.”
This change will likely make personal imports more predictable and affordable, helping curb informal channels and encourage compliance with official customs procedures. At the same time, by calibrating duties carefully, it will also balance revenue needs with consumer relief, making travel and overseas purchases less punitive without undermining domestic industry protections.
7. International Travel and Remittances, Medical Tourism, Temple Town Infrastructure
The Budget also announced significant changes with regard to taxation in the context of overseas travel and foreign remittances, medical tourism and temple town infrastructure.
For overseas tour programme packages, or expenses for travel, hotel stay or boarding, Tax Collection at Source (TCS) have been fixed at 5 per cent. Under the Liberalised Remittance Scheme (LRS), remittances exceeding Rs 10 lakh for purposes other than education and medical treatment) have been taxed at 20 per cent. Education and medical remittances have still been treated differently under the scheme.
The government has also proposed to revise the provisions governing baggage clearance during international travel to address the concerns of passengers. The revised rules have enhanced duty-free allowances and provided clarity regarding the temporary carriage of goods brought in or taken out.
The Budget also announced the launch of a scheme to help states set up five Regional Medical Hubs in collaboration with the private sector. The hubs will be integrated healthcare complexes with medical treatment facilities, education and research infrastructure under one ecosystem. Plans have been made for the establishment of AYUSH centres, medical value tourism facilitation centres, and separate infrastructure for diagnostics, post-care and rehabilitation. These facilities will be targeted towards supporting international patients throughout the entire treatment cycle from arrival and consultation to recovery and follow up.
Infrastructure development in temple towns and spiritual destinations was another highlight of the Budget. Temple towns have been identified under the City Economic Regions and allocated Rs 5,000 crore each for a period of five years for development, including providing modern infrastructure and basic amenities to cater to the increase in number of visitors.
A dedicated scheme has also been launched for development of Buddhist Circuits in Arunachal Pradesh, Sikkim, Assam, Manipur, Mizoram and Tripura. The scheme has covered preservation of temples and monasteries, the creation of pilgrimage interpretation centres as well as improvements in connectivity.
8. New All India Institutes Of Ayurveda, Upgrading AYUSH Pharmacies
The Budget has proposed setting up three new All India Institutes of Ayurveda, upgrade AYUSH pharmacies and Drug Testing Labs for a higher standard of certification ecosystem. In addition to it, the budget proposed to train more people, spread awareness about traditional medicine, and increase skilled personnel in the domain, along with upgrading the WHO Global Traditional Medicine Centre in Jamnagar to out impetus on research.
One more important proposal was to establish new institutions for Allied Health Professionals (AHPs) in 10 selected disciplines and upgrade the existing ones and developing a range of National Skill Qualification Framework (NSQF)-aligned programmes to train 150,000 multiskilled caregivers.
9. Tax Reforms To Manufacturing Sector
For the manufacturing sector, she made a number of announcements. These include:
Exemption from income tax for five years to non- residents providing capital goods, equipment or tooling, to any toll manufacturer in a bonded zone.
Provision of safe harbour to non-residents for component warehousing in a bonded warehouse.
Deferred duty payment window to trusted manufacturers.
Increase in the limit for duty-free imports of specified inputs used for processing seafood products for export, from the current 1 per cent to 3 per cent of the FOB value of the previous year’s export turnover.
Duty-free imports of specified inputs extended to export of shoe uppers in addition to leather or synthetic footwear.
Extension of time for the export of final product from the existing 6 months to 1 year, for exporters of leather or textile garments, leather and synthetic footwear.
Exemption from basic customs duty on specified parts used in the manufacture of microwave ovens.
Exemption from basic customs duty on components and parts used in aircraft manufacturing.
Exemption from basic customs duty on raw materials imported for manufacture of aircraft parts used in maintenance, repair, or overhaul requirements defence units.
Regular importers with trusted longstanding supply chains to be recognized in the risk system.
Export cargo using electronic sealing to be provided through clearance from the factory premises to the ship.
A special one-time measure to facilitate sale in domestic tariff areas at concessional rate of duty by eligible manufacturing units of SEZs.
