Highlights of Union Budget 2026-27

Top Highlights of Budget 2026-27:

 Macroeconomic Framework

• Fiscal deficit for FY27 set at 4.2% to 4.3% of GDP.

• Real GDP growth projected between 6.8% to 7.2%.

• Total expenditure estimated at Rs 53.5 lakh crore.

• Net tax receipts projected at Rs 28.7 lakh crore.

• Capital expenditure increased to Rs 12.2 lakh crore.

• Public capex pegged at Rs 11 lakh crore.

• Market borrowing estimated at Rs 11.7 lakh crore.

New Income Tax Framework

• Income Tax Act, 1961 to be replaced by Income Tax Act, 2025, effective from 1 April 2026.

• Objective is simpler law, fewer sections, easier interpretation, and reduced litigation.

• Simplified return forms to be notified shortly.

New Tax Slabs (New Regime)

• Rs 0 to Rs 4 lakh: NIL

• Rs 4 to Rs 8 lakh: 5%

• Rs 8 to Rs 12 lakh: 10%

• Rs 12 to Rs 16 lakh: 15%

• Rs 16 to Rs 20 lakh: 20%

• Rs 20 to Rs 24 lakh: 25%

• Above Rs 24 lakh: 30%

• Income up to Rs 12 lakh is exempt effectively tax free after rebate.

• Standard deduction for salaried employees increased to Rs 75,000.

ITR Timeline Rationalisation

• Individuals (ITR 1 and 2): 31 July

• Non-audit cases and Trusts: 31 August

Belated and Revised Returns

• Filing allowed till 31 March of relevant AY with nominal late fee.

Updated Returns

• Allowed even after reassessment.

• Additional tax payable at 10%.

Tax Audit Changes

• Delay in Tax Audit Report will now attract late fees instead of penalty.

• Upload not allowed without payment of late fees.

TDS and TCS Rationalisation

• TCS under LRS reduced to 2% for foreign tours, education, and medical expenses, no threshold limit.

• TDS on rent annual limit increased to Rs 6 lakh.

• TCS threshold on sale of goods raised to Rs 10 lakh.

• Manpower supply brought under Section 194C, TDS clarified at 1% or 2%.

• Property purchase from NRI: PAN-based challan allowed, TAN not required.

• MACT interest to individuals fully exempt, no TDS.

Corporate Tax Changes

• MAT reduced from 15% to 14%.

• MAT credit allowed in new regime up to 25% of tax liability.

• No MAT credit accumulation after 1 April 2026.

• NRIs under presumptive taxation exempt from MAT.

• Buyback: additional tax on promoters, non-corporate promoters taxed at 30%.

Foreign Asset Compliance Relief

One-time 6 month disclosure scheme

Category A

• Undisclosed foreign income/assets up to Rs 1 crore

• Tax 30% + additional 30%

• Immunity from penalty and prosecution

Category B

• Income disclosed but assets not reported

• Asset value up to Rs 5 crore

• One-time fee Rs 1 lakh

• No penalty or prosecution for non-immovable foreign assets below Rs 20 lakh (retrospective).

Penalty and Litigation Reforms

• Single order for assessment and penalty.

• No interest on penalty during appeal.

• Appeal pre-deposit reduced from 20% to 10%.

• Certain penalties converted into fees.

• Minor offences decriminalised.

• Maximum imprisonment reduced to 2 years.

Corporate Mitras Program

• ICAI, ICSI and ICMAI to introduce modular courses to create Corporate Mitras.

• Objective is to support MSMEs in Tier 2 and Tier 3 cities with compliance, GST, income tax, governance, documentation, and advisory.

Agriculture and Rural Economy

• Kisan Credit Card limit increased from Rs 3 lakh to Rs 5 lakh, benefiting 7.7 crore farmers.

• Makhana Board to be set up in Bihar.

• Investment in Western Koshi Canal project.

• Panchayat-level post-harvest storage facilities announced.

Technology, Energy and Manufacturing

• Nuclear Energy Mission with Small Modular Reactors and private participation.

• Customs duty removed on Lithium and Cobalt powder.

• Semiconductor Mission 2.0 announced.

• Biopharma Shakti launched with Rs 10,000 crore outlay.

Railways and Infrastructure

• Seven new high-speed rail corridors.

• Kavach 4.0 anti-collision system across rail network by 2028.

• States to get Rs 1.5 lakh crore as 50-year interest-free loans for infrastructure.

Cooperative Sector Relief

• Deduction extended to cattle feed and cotton seed supplied by members.

• Inter-cooperative dividend deduction allowed.

• Dividend exemption for notified national cooperative federations till 31 Jan 2026.

IT and Transfer Pricing

• IT, ITES, KPO and contract R&D classified under Information Technology Services.

• Uniform safe harbour margin of 15.5%.

• Safe harbour option available for 5 consecutive years.

• APA for IT services targeted within 2 years.

GST Performance (January 2026)

• Gross GST: Rs 1.93 lakh crore (6.2% growth).

• Net GST: Rs 1.70 lakh crore.

• YTD GST: Rs 18.43 lakh crore.

• Domestic GST growth 4.8%.

• Import GST growth 10.1%.

• Compensation cess sharply reduced.

Download Finance Bill, Budget at glance and key to budget below:

finance_bill.pdf

budget_at_a_glance.pdf

key_to_budget_document_2026.pdf

Regards,
KARWA & ASSOCIATES
CA ANSHUL KARWA