Finance Minister Nirmala Sitharaman will present the Union Budget 2026–27 on February 1, 2026, in an unusual Sunday session, as the government navigates a complex economic environment shaped by global trade risks and domestic growth priorities. The Budget Session of Parliament will commence on January 28, while the Economic Survey, expected on January 31, is likely to outline the macroeconomic backdrop ahead of the budget presentation.
One of the key areas of focus is income tax relief for the middle class. Following last year’s structural overhaul of the tax regime, economists expect incremental changes rather than sweeping reforms. Suggestions from experts include an increase in the standard deduction to around one lakh rupees, rationalisation of income tax slabs, and a possible upward revision of the income threshold for the highest tax bracket. There is also growing demand for allowing health insurance deductions under Section 80D within the new tax regime to make it more attractive for taxpayers.
Housing is another sector where policy support is anticipated. Industry participants are calling for the revival of Section 80EEA benefits for affordable housing, expansion of the Pradhan Mantri Awas Yojana, and enhanced tax rebates for middle-income homebuyers to stimulate demand in the real estate sector.
Capital market participants are watching closely for potential relief measures such as a higher long-term capital gains exemption limit on equities, adjustments to tax rates, higher thresholds for tax deducted at source, and simpler compliance norms. Measures to streamline income tax return filing and extend submission deadlines are also under consideration.
On the expenditure front, the government is expected to maintain a strong focus on public capital expenditure. Estimates suggest allocations of 11 to 12 lakh crore rupees for infrastructure development, covering roads, railways, urban infrastructure, renewable energy, and defence. Defence spending could see an increase in view of regional security concerns, while continued emphasis on domestic manufacturing under the Atmanirbhar Bharat initiative is likely.
Fiscal discipline remains a key priority. Analysts expect the government to target a fiscal deficit of around 4.4 percent of GDP or marginally lower, balancing growth-supportive spending with prudence amid global uncertainties and signs of moderating domestic consumption.
Several sectors are expected to receive targeted policy support. Manufacturing and exports may benefit from extensions to production-linked incentive schemes, duty rationalisation, and export promotion measures. Clean energy, electric mobility, and green hydrogen are likely to see higher budgetary allocations in line with India’s climate commitments. Agriculture, education, skill development, MSMEs, startups, electronics manufacturing, and logistics are also expected to feature prominently.
With GDP growth for FY26 projected in the range of 7 to 7.5 percent, markets will closely assess the budget for signals on tax policy, capital expenditure continuity, and reform momentum. The Economic Survey is expected to project growth at around 7.3 to 7.4 percent, setting the tone for the government’s fiscal and economic roadmap.
