Union Budget 2026: Top Expectations

Every month, we keep track of the income that we get and the expenses that are expected to be spent, and from a country perspective, it is the same. Finance Minister Nirmala Sitharaman is expected to present the Union Budget 2026 in Parliament on February 1, 2026 (Sunday), at 11 AM for the financial year 2026-27.

To track these developments, the NSE and BSE are open for trading from 9:15 AM to 3:30 PM, which is special, as Sundays are usually a day off. Before the budget announcement, various sectors had certain expectations, including tax benefits, relaxations, higher government allocations, and income tax-related relaxations for taxpayers. Here are some of the expectations gathered as per various reports.

Union Budget 2026 Expectations:

Income Tax:

• The ICAI has proposed an optional Joint Taxation Scheme, where married couples can combine their incomes and file a single ITR. This is aimed at benefiting single-earner households by potentially doubling exemption limits and providing wider tax slabs.

• With over 7.5 crore ITRs filed in FY25, experts expect the basic exemption limit under the new tax regime to rise from Rs 3 lakh to Rs 5-6 lakh, focused towards senior citizens.

• Salaried taxpayers seek an increase in the standard deduction from the current Rs 75,000 (new tax regime) and Rs 50,000 (old tax regime).

• With Budget 2025 having already introduced meaningful slab relaxations and higher tax-free thresholds, taxpayers can anticipate a period of stability rather than further major concessions this year. (source)

Infrastructure & Capital Expenditure

• As per SBI Research, the government is expected to increase capital expenditure beyond FY25's Rs 11.11 lakh crore and is expected to cross Rs 12 lakh crore in FY27.

• Reports suggest the government set a construction target of roughly 10,000 km for FY27, with a 2.9 lakh crore allocation expected for the road and highway sector.

• Indian Railways is anticipated to receive a significant outlay projected over Rs 3 lakh crore to prioritise safety through the Kavach 4.0 anti-collision system and to fund the rollout of the sleeper version of Vande Bharat and Amrit Bharat trains.

• There is a strong push for a 10% to 15% increase in funding for urban infrastructure, focusing on Transit-Oriented Development (TOD) and the expansion of Namo Bharat rapid rail and metro networks into Tier-2 and Tier-3 cities.

• Expectations include fresh capital support for deep-draft port development like the Vadhavan port, and the creation of Port-Linked Industrial Clusters to improve India's global maritime competitiveness.

MSMEs & Small Businesses

• Industry bodies like FICCI have urged the expansion of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) cover and stricter enforcement of the 45-day payment mandate.

• Stakeholders have formally urged the government to implement a micro-focused GST track with quarterly filing to reduce disproportionate compliance costs.

• The industry has proposed a 24-hour automated customs clearance for MSME import-export shipments below Rs 10 lakh. This would use AI-based risk profiling linked to the Udyam portal, significantly reducing logistics costs and time for small exporters.

Manufacturing & Make in India Initiative

• Deloitte suggests a shift from subsidy-heavy narratives to supply-side competitiveness, focusing on technology adoption and logistics efficiency to meet global delivery benchmarks.

• KPMG highlights the need for a national platform to score MSME competitiveness and stronger incentives to close the digital divide in manufacturing.

• Various analysts propose a milestone-based incentive scheme, similar to PLI, to provide tax subsidies and grants specifically for manufacturers embarking on digital transformation and AI journeys.

Real Estate & Housing

• Industry bodies like CREDAI and NAREDCO are urging the government to raise the affordable housing price cap from the current Rs 45 lakh to reflect current market realities in metro cities.

• There is a demand to harmonise tax laws for Real Estate Investment Trusts (REITs), specifically by including REIT units under 80C eligibility.

• The government think tank (NITI Aayog) had proposed the reintroduction of the Section 80-IBA 100% tax holiday for developers to restore project viability in the affordable housing segment.

• To expand credit access, NITI Aayog has even recommended doubling the loan limit under the Credit Risk Guarantee Fund Scheme (CRGFTLIH) from Rs 20 lakh to Rs 40 lakh for EWS and LIG households.

Agriculture & Rural Development

• EY expects the government to implement the NICRA (National Innovations on Climate Resilient Agriculture) scheme nationwide to safeguard 50,000 villages against production losses from climate change.

• Experts anticipate the national scale-up of "AgriStack", a digital framework that links land records with crop data to improve farmers' access to digital credit and crop insurance.

• The sector expects a new "Seeds Bill" and fiscal incentives for the adoption of biofortified, high-yielding, and climate-resilient seed varieties to ensure long-term food security.

Healthcare

• As per ICRA, the medical device manufacturers expect the budget to address the 18% GST on inputs versus 5% on finished goods, which currently locks up significant working capital.

• KPMG suggests a dedicated annual budget of Rs 250 to 300 crore under the National Health Mission to fund AI/ML-driven healthcare projects and cybersecurity for health data.

• Industry leaders are pushing for hospitals to be classified as "core national infrastructure" to unlock long-term, lower-cost financing for expansion into Tier-2 and Tier-3 cities.

Education & Skill Development

• Edtech leaders and professional bodies are urging the government to reduce the 18% GST on upskilling and reskilling programmes to 5% to make learning more accessible.

• Experts expect the budget to launch a national initiative for AI/ML apprenticeships that uses GenAI tutors to deliver curriculum in regional languages for rural youth.

• Education leaders are calling for a shift in funding from enrolment numbers to improving quality infrastructure and investments into online education and online degree programmes in the mainstream.

Defence & Aerospace

• As per sources, the Defence Secretary indicated plans to see a 20% increase in capital expenditure in the Union Budget 2026.

• Deloitte and the Indian Space Association (ISpA) are urging the government to grant "Critical Infrastructure" status to the space sector to unlock low-cost, long-term financing for private satellite and launch firms.

• According to a FICCI survey, industry leaders recommend that the Budget 2026 prioritise manufacturing and capital expenditure, specifically by increasing the defence capital outlay to 30% and allocating Rs 1,000 crore each for drone PLI and R&D funds.

• There is an expectation for investment-linked allowance for capital expenditure in manufacturing and Maintenance, Repair, and Operations (MRO), which is beneficial for both military and commercial aircraft.

Green Energy & Electric Vehicles

• Industry leaders expect a recalibration of PLI schemes to include lower investment thresholds for MSMEs and targeted tax breaks for battery material R&D.

• Industry stakeholders are calling for expanded Viability Gap Funding (VGF) and a reduction in GST from 18% to 5% for Battery Energy Storage Systems (BESS) to ensure grid stability as renewable capacity scales.

• KPMG and industry leaders are seeking incentives for battery recycling infrastructure and policies that favour recycled materials to reduce the raw material risk for EV batteries.

• Industry leaders are advocating for the removal of the inverted duty structure by extending GST refunds to capital goods and input services for EV manufacturers to lower production costs.

Digital Economy & Technology

• Industry leaders expect Budget 2026 to launch a Rs 10,000 crore PLI scheme for electronics and increase funding for AI infrastructure and cybersecurity for India's digital economy.

• The Union Budget 2026 is expected to focus on expanding Digital Public Infrastructure (DPI) into healthcare, logistics, and e-governance to deepen digital transformation and boost productivity.

• Industry stakeholders are pushing for a broader ESOP tax deferment to cover all 1.59 lakh DPIIT-recognised startups and seeking explicit tax clarity for foreign cloud providers to prevent unintended liabilities.

Conclusion

As the nation looks toward the upcoming announcement, these expectations highlight a collective hope for a balance between growth and relief. By addressing the needs of the middle class alongside large-scale industrial goals, the government can create a more stable and competitive economy.

While these Union Budget 2026 expectations represent the wish lists of various sectors, they reflect a shared vision for a stronger India. The final roadmap will ultimately show how the government intends to support small businesses, modernise infrastructure, and improve the daily lives of citizens. All eyes now remain on the parliamentary presentation to see which of these goals becomes a reality.