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Tax reform to lower input duties: What to expect in Union Budget 2026-27
The Union Budget 2026-27 also comes at a time of a number of uncertainties and massive global tensions across the world.
Union finance minister Nirmala Sitharaman is set to present the Union Budget for the financial year 2026-27 on Sunday at 11 am. All eyes will be on her speech as she presents her ninth consecutive budget, as expectations are high around reforms and planned government expenditure.
This budget also comes at a time of a number of uncertainties and massive global tensions across the world. Although recent GDP growth has reached a six-quarter high of 8.2%, this year’s budget comes amid geopolitical tensions, volatile commodity prices and uneven monetary easing by major central banks, as mentioned in an earlier HT report.
Follow live updates related to Union Budget 2026 here.
Budget 2026: Key things to watch out for
Here are 10 key things to watch out for in the Union Budget 2026-27:
1. Fiscal deficit, government debt: Experts expect this year’s budget to focus on reducing government debt to a range of 49% to 51% of gross domestic product. The government is expected to target a fiscal deficit of 4.2% of GDP for 2026-27, while gross borrowing is likely to increase to between 16 trillion rupees and 16.8 trillion rupees, Reuters said in a report.
2. Focus on long-term capital gains: Taxpayers will watch out for a rise in the threshold of long-term capital gains (LTCG) tax and an expansion of the rebate under Section 87A, which deals with income tax rebates to resident Indians. Notably, under the new tax regime, individuals with a total taxable income of up to ₹12 lakh can claim a tax rebate of up to ₹60,000, but if they invest in mutual funds, they still have to pay capital gains tax.
3. Military spending: India is expected to ease conditions for foreign investment in defence units, since the defence ministry seeks a 20% increase in military spending, as per Reuters.
4. Rise in standard deduction: There are expectations that the Union Budget 2026-27 could announce a rise in the standard deduction, since people are looking for a hike in the exemption to ₹1 lakh from the existing ₹75,000 under the new tax regime.
5. Lower import duties: The Federation of Indian Export Organisations wants lower import duties on relevant inputs for several export-oriented industries, including electronic parts and textiles, to boost domestic manufacturing. This comes as exporters face increasing pressure from US President Donald Trump, who has already imposed 50% tariffs on Indian goods entering the country.
Follow live updates related to income tax related announcements in Union Budget here.
6. Stronger private sector investment: Experts are also expecting tax relief and better ease of doing business, which is expected to frame a favourable environment for the growth of the Indian economy through stronger private sector investment.
7. Deregulation: Aside from experts, taxpayers are also looking out for the government’s deregulation efforts through tax cuts. This could lead to a rise in demand in the economy and help push the ease of doing business.
8. Capital expenditure: The Union Budget 2026-27 could aim for an increase in capital expenditure. According to previous data between 2021-22 and 2025-26, the share of capital expenditure as a percentage of GDP rose from 2.5% to 3.1% because of the government’s efforts to spend on infrastructure.
9. Taxes: Several tax experts have also called for scrapping the securities transaction tax, levied on equity and derivatives trades even if they result in losses. The Federation of Indian Chambers of Commerce and Industry (FICCI) has requested changes to income tax rules that hamper the ability of companies such as Apple to supply machinery to contract manufacturers.
10. Focus on India’s borrowing: Attention will also be on the country’s borrowing habits, since a possible higher fiscal deficit will lead to a rise in borrowings for the financial year.
