On February 1, Finance Minister Nirmala Sitharaman will present the Union Budget 2026 – her ninth consecutive budget presentation – amid expectations of major changes in customs duties on the lines of GST rationalization.
The budget is also likely to outline a path to target debt-to-GDP ratio as India’s fiscal management focus shifts from deficit management to debt reduction. Individuals who got huge tax relief last year through higher income tax exception limits and GST rate cuts are still expecting higher standard deductions.
Here’s a look at the key budget expectations:
- With the new and simplified Income Tax Act, 2025, coming into force from April 1, 2026, the industry expects the Budget to outline transition provisions, rules and FAQs for better understanding.
- Increase in standard deduction to encourage individuals to shift from the old system to the new income tax regime.
- Rationalization of TDS categories into lower rates, slabs.
- Reducing customs duty into tax slabs and unlocking amnesty scheme ₹Rs 1.53 lakh crore stuck in disputes, procedural simplification to promote ease of doing business.
- Focus on reducing India’s debt-to-GDP ratio by FY27.
- Higher defense budget in view of rising geopolitical tensions.
- Outlay for Developed India – Guarantee for Employment and Livelihood Mission (Rural) (VB-G RAM G) Scheme under which the cost will be shared between the Center and States in the ratio of 60:40.
- Provision of the 8th Pay Commission, which came into effect on January 1, 2026.
- Tax devolution to the states as per the recommendations of the 16th Finance Commission.
- Incentives for MSMEs and tariff-sensitive sectors like gems and jewellery, apparel and leather.
- Funding for exploration and processing of critical minerals such as lithium, cobalt and rare earth magnets.
