Budget 2026-27: What India expects from today’s Union Budget

As Finance Minister Nirmala Sitharaman presents the Union Budget at 11 am, expectations are high across taxes, infrastructure, defence, welfare, digital growth and state finances, with special focus on the 16th Finance Commission report.

The much-awaited Union Budget will be presented today at 11 am by Union Finance Minister Nirmala Sitharaman. This year’s budget is expected to focus on broad-based national development, balancing growth, welfare and fiscal discipline. Ahead of the budget speech, the report of the 16th Finance Commission will be tabled in Parliament, drawing attention to how central tax revenues will be shared with states.

The Finance Commission report is especially significant for states like Karnataka, where concerns have repeatedly been raised about receiving a lower share of central taxes. The report is expected to provide clarity on state-wise allocations and future financial devolution.

On the taxation front, there is strong expectation of major relief for individuals. The income tax exemption limit could be raised from ₹12 lakh to ₹20 lakh. For married couples, the government may introduce a joint taxation system, potentially offering tax exemption on combined income up to ₹24 lakh annually. At the higher end, incomes above ₹30 lakh per year may attract a flat 30% tax rate.

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Capital market investors are also closely watching the budget. Long-term capital gains tax may be reduced, while short-term capital gains tax could be cut to 5%. There is also speculation that LTCG could be brought down to zero in select cases. Mutual fund investments held for 5 to 7 years may be exempted from taxation to encourage long-term savings and investment.

In housing and urban development, the government is expected to raise the HRA exemption limit and increase the tax exemption on home loan interest to ₹2 lakh. Affordable housing is likely to get a major push, with the cost limit possibly increased from ₹45 lakh to ₹60 lakh, making more homes eligible under the scheme.

Infrastructure remains a core priority. Capital expenditure may be increased by 10% to ₹12 lakh crore, supporting highways, ports, railways, airports and overall connectivity. The government may also target reducing the fiscal deficit to 4.2% of GDP, reinforcing its commitment to fiscal consolidation.

To attract foreign direct investment, reductions in both long-term and short-term capital gains taxes are expected. The Production Linked Incentive (PLI) scheme may be extended to more sectors and for additional years. MSMEs could benefit from enhanced credit support, while the healthcare sector may see insurance simplification and structural reforms.

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Customs duty on silver, currently at 7.5% along with 3% GST, may be reduced, which could bring down silver prices. Similar relief is expected on gold imports, potentially lowering gold prices in the domestic market.

The budget is also likely to allocate more funds for highways and airport connectivity, boost Digital India initiatives, and strengthen AI, skill development and digital infrastructure. Defence spending may rise significantly in the backdrop of Operation Sindoor, focusing on military modernisation and procurement of advanced weapons.

Railways are expected to receive higher allocations, particularly for Vande Bharat trains, safety upgrades and modernisation. In agriculture, the PM Kisan Samman Nidhi amount may be increased from ₹2,000 to ₹3,000 per instalment, paid every four months.

While schemes like VB Ram G may reduce central expenditure due to a 40% state contribution, the Centre is expected to outline plans to transform Indian banks into globally competitive institutions.

Key Expectations at a Glance

1.    Income tax exemption limit may rise from ₹12 lakh to ₹20 lakh
2.    Reduction in long-term capital gains tax
3.    Joint taxation system for married couples with exemption up to ₹24 lakh
4.    30% tax rate for annual income above ₹30 lakh
5.    STCG tax may drop to 5%, LTCG possibly to 0%
6.    No tax on mutual funds held for 5–7 years
7.    Increase in HRA exemption limit
8.    Home loan interest tax exemption may go up to ₹2 lakh
9.    Capital expenditure likely to rise 10% to ₹12 lakh crore
10.    Fiscal deficit target of 4.2% of GDP
11.    Capital gains tax cuts to attract FDI
12.    Expansion of PLI scheme to more sectors and years
13.    Enhanced loan support for MSMEs
14.    Health sector reforms, including insurance simplification
15.    Reduction in silver customs duty and GST
16.    Possible cut in gold customs duty
17.    Higher allocation for highways and airport connectivity
18.    Strong push for affordable housing
19.    Affordable housing cost limit may rise to ₹60 lakh
20.    Increased focus on Digital India
21.    Higher defence allocation under Operation Sindoor
22.    More funds for Vande Bharat trains and rail safety
23.    PM Kisan instalment may increase to ₹3,000
24.    Lower central spending due to state share in VB Ram G scheme
25.    Increased focus on AI, skill development and digital infrastructure
26.    Plan to develop Indian banks into global banking institutions