The Union Budget for 2026-27 sets a bold agenda for Viksit Bharat (Developed India), aiming for a 7% economic growth rate. From a complete overhaul of the Income Tax Act to major changes in stock market trading, here is a detailed look at what has changed and how it impacts you.
1. Personal Finance & Income Tax: A New Era
The government has announced a massive structural change to the Direct tax system, replacing the old laws with a brand new framework.The New Income Tax Act, 2025
- Effective Date: The existing Income Tax law will be replaced by the Income Tax Act, 2025, which comes into effect from April 1, 2026.
- Simplified Filing: The budget promises simplified return forms to make filing easier for taxpayers.
- New Deadlines:
- Filing Returns: Clear deadlines have been set: July 31 for individuals and August 31 for trusts.
- Revised Returns: The window to file a revised return has been extended significantly, moving the deadline from December to March.
Relief Measures for Individuals
- Cheaper Foreign Education: If you are sending money abroad for education, the Tax Collected at Source (TCS) on Liberalised Remittance Scheme (LRS) payments has been slashed from 5% to 2%.
- Accident Compensation: Interest received on motor accident compensation is now fully tax-exempt.
- Foreign Tour Packages: The TCS rate for foreign tour packages has been set at 2%.
Disclosure & Amnesty
- Foreign Assets: A one-time voluntary disclosure scheme allows taxpayers to declare undisclosed foreign assets and income. You can regularize this by paying a 30% tax plus a fixed fee, avoiding stricter penalties later.
2. Stock Market & Investments: What Gets Expensive?
Traders and investors face higher costs this year, particularly in the derivatives segment, while share buy-backs see a change in tax treatment.Higher Trading Costs (STT Hikes)
To curb excessive speculation, the Securities Transaction Tax (STT) has been increased:- Futures: STT on the sale of futures has risen from 0.02% to 0.05%.
- Options Premium: STT on the sale of options premium has increased from 0.1% to 0.15%.
- Options Exercise: STT on the exercise of options has jumped from 0.125% to 0.15%.
Share Buy-Backs
- Tax Shift: Income from share buy-backs will no longer be tax-free in the hands of shareholders. It will now be taxed as Capital Gains (Long Term or Short Term) for the recipient, shifting the burden from the company to the investor.
3. What Gets Cheaper? (Customs & Goods)
The budget uses customs duty exemptions to lower costs for domestic manufacturing, which should eventually reduce prices for end consumers in specific sectors.- Microwave Ovens: A basic customs duty exemption has been introduced for microwave oven components.
- Aircraft & Defense: To boost local production, aircraft manufacturing parts and raw materials for aircraft maintenance and defense units are now allowed duty-free imports.
- Textiles & Leather: The period for exporting goods has been extended from 6 months to 1 year for garment and footwear exporters.
4. Business & MSMEs: The Growth Engine
Micro, Small, and Medium Enterprises (MSMEs) receive major support through a “Three-Pronged Approach” aimed at making them global champions.Financial Support
- Equity Infusion: A massive ₹12,000 crore has been allocated to a new fund to provide equity support to MSMEs.
- Credit Guarantee: The “Self-Reliant India Fund” gets a ₹2,000 crore top-up.
Solving the Cash Flow Problem
- Mandatory TReDS: It is now mandatory for all Central Public Sector Enterprises (CPSEs) to procure from MSMEs via the TReDS platform. This ensures invoices are discounted and paid faster, solving liquidity crunches.
Ease of Doing Business
- Corporate Mitras: A new program will deploy professionals (“Corporate Mitras”) in Tier-II and Tier-III towns to help MSMEs with compliance at affordable costs.
- Export Cap Removed: The value cap of ₹10 lakh per consignment on courier exports has been removed, allowing MSMEs to export larger quantities seamlessly.
5. Infrastructure & Strategic Initiatives
The government is continuing its heavy investment in infrastructure, targeting both physical development and human capital.- University Townships: Five new university townships will be developed near major industrial and logistics corridors to integrate education with industry.
- Women in STEM: To encourage female participation in science, one girls’ hostel will be established in Higher Education STEM institutions in every district.
- Tourism:
- Big Cat Summit: India will host the first-ever international “Global Big Cat Summit”.
- Heritage Sites: 15 archaeological sites will be developed into experiential cultural destinations.
6. GIFT City: The Global Financial Hub
India’s push to establish GIFT City as a premier global financial powerhouse receives a massive boost in this budget. Recognizing the need for long-term stability to attract international giants, the government has unveiled an aggressive package of tax incentives and extended benefits for GIFT City, Designed to outpace global competitors and cement India’s position on the world economic map.- 20-Year Tax Holiday: The tax holiday for IFSC units has been extended from 10 years to 20 consecutive years.
- Extended Eligibility: The overall eligibility window has been extended from 15 years to 25 years.
- Data Centers: Foreign companies providing cloud and data center services get a tax holiday until 2047.
Conclusion
Budget 2026-27 is a balancing act between fostering long-term growth and ensuring immediate fiscal discipline. While stock market participants may feel the pinch of higher taxes, the budget offers significant relief to students, MSMEs, and the manufacturing sector. With the introduction of the new Income Tax Act and simplified compliance norms, the government is clearly pushing for a more transparent and efficient tax regime. Ultimately, these measures aim to lay a robust foundation for a Viksit Bharat, ensuring that India remains on a steady path toward becoming a global economic powerhouse.Frequently Asked Questions (FAQs)
1. When does the new Income Tax Act come into effect?
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The new Income Tax Act, 2025 will be effective from April 1, 2026. Until then, the existing laws apply.
2. Will buying a house or property as an NRI get easier?
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Yes. For property purchases by NRIs, TDS can now be deducted using just their PAN without the need for TAN.
3. Has the budget made trading in the stock market more expensive?
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Yes. STT on futures is up to 0.05%, and on options premium it is up to 0.15%.
4. Are there any benefits for students studying abroad?
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Yes. TCS on LRS payments for education has been reduced from 5% to 2%.
5. What is the “Orange Economy” mentioned in the budget?
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It refers to creative industries. The budget proposes AVGC Content Creator Labs in schools and colleges.
6. Is there any relief for taxpayers with pending disputes?
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The pre-deposit for stay of demand has been reduced from 20% to 10%. Imprisonment for non-payment of TDS is reduced to a maximum of 2 years.
7. How does the budget help small businesses (MSMEs)?
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A ₹12,000 crore equity fund for MSMEs, mandatory TReDS adoption by CPSEs, and removal of the courier export cap have been announced.