Budget 2026-27

GOVERNMENT OF INDIA
BUDGET 2026-2027
SPEECH
OF
NIRMALA SITHARAMAN
MINISTER OF FINANCE
February 1, 2026
CONTENTS
Introduction Page No.
PART - A
Yuva Shakti and 3 kartavya Reform Express First kartavya: to accelerate and sustain economic growth Second kartavya: fulfil aspirations and build capacity 10
Third kartavya: Sabka Sath, Sabka Vikas 14
16th Finance Commission 18
Fiscal Consolidation 18
PART – B
Direct taxes 20
Indirect Taxes 26
Annexure to Part-A 32
Annexure to Part-B
Amendments relating to Direct Taxes 33
Amendments relating to Indirect Taxes 50
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Budget 2026-2027
Speech of
Nirmala Sitharaman
Minister of Finance
February 1, 2026
Hon’ble Speaker,
On the sacred occasion of Magha Purnima and the birth
anniversary of Guru Ravidas, I present the Budget for the year 2026-2027.
Introduction
1. Since we assumed office 12 years ago, India’s economic trajectory
has been marked by stability, fiscal discipline, sustained growth and
moderate inflation. This is the result of conscious choices we have made,
even in times of heightened uncertainty and disruption. Our
Government, led by Hon’ble Prime Minister Modi, has decisively and
consistently chosen action over ambivalence, reform over rhetoric and
people over populism.
2. We have pursued far reaching structural reforms,
fiscal prudence and monetary stability whilst
maintaining a strong thrust on public investment.
Keeping atmanirbharta as a lodestar, we have built domestic
manufacturing capacity, energy security and reduced critical import
dependencies. Simultaneously, we have ensured that citizens benefit
from every action of the Government, undertaking reforms to support
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employment generation, agricultural productivity, household purchasing
power and universal services to people.
These measures have delivered a high growth rate of around 7% and
helped us make substantial strides in poverty reduction and
improvement in the lives of our people.
3. Today, we face an external environment in which trade and
multilateralism are imperilled and access to resources and supply chains
are disrupted. New technologies are transforming production systems
while sharply increasing demands on water, energy and critical minerals.
4. India will continue to take confident steps towards Viksit Bharat,
balancing ambition with inclusion. As a growing economy with expanding
trade and capital needs, India must also remain deeply integrated with
global markets, exporting more and attracting stable long-term
investment.
Part A
5. As I begin Part A, I want to express my gratitude to the people for
standing firmly with us as we forge our way together towards becoming
one of the largest economies of the world.
6. Our aim is to transform aspiration into achievement and potential
into performance, as we ensure that the dividends of growth reach every
farmer, the scheduled caste, the scheduled tribes, the nomads, the youth,
the poor and the women.
7. In the Viksit Bharat Young Leaders Dialogue 2026, several
innovative ideas were shared with our Prime Minister, which have
inspired many of the proposals, making this a unique Yuva Shakti-driven
Budget.
8. Our Government’s ‘Sankalp’ is to focus on our poor,
underprivileged and the disadvantaged. To deliver on this Sankalp, and
given that this is the first Budget prepared in Kartavya Bhawan, we are
inspired by 3 kartavya:
9. Our first kartavya is to accelerate and sustain economic growth,
by enhancing productivity and competitiveness, and building resilience to
volatile global dynamics.
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10. Our second kartavya is to fulfil aspirations of our people and build
their capacity, making them strong partners in India’s path to prosperity.
11. Our third kartavya, aligned with our vision of Sabka Sath, Sabka
Vikas, is to ensure that every family, community, region and sector has
access to resources, amenities and opportunities for meaningful
participation.
12. This threefold approach requires a supportive ecosystem. The first
requirement is to sustain the momentum of structural reforms—
continuous, adaptive, and forward-looking. Second, a robust and
resilient financial sector is central to mobilising savings, allocating capital
efficiently and managing risks. Third, cutting-edge technologies,
including AI applications, can serve as force multipliers for better
governance.
Reform Express
13. Our Government has undertaken comprehensive economic
reforms towards creating employment, boosting productivity and
accelerating growth. After the Prime Minister’s announcement on
Independence Day in 2025, over 350 reforms have been rolled out. These
include GST simplification, notification of Labour Codes, and
rationalisation of mandatory Quality Control Orders. High Level
Committees have been formed and in parallel, the Central Government
is working with the State Governments on deregulation and reducing
compliance requirements.
14. The Reform Express is well on its way and will maintain its
momentum to help us fulfil our kartavya.
I now move to the specific proposals.
15. Under our first kartavya to accelerate and sustain economic
growth, I propose interventions in six areas: i) Scaling up manufacturing
in 7 strategic and frontier sectors; ii) Rejuvenating legacy industrial
sectors; iii) Creating “Champion MSMEs”; iv) Delivering a powerful push
to Infrastructure; v) Ensuring long-term energy security and stability; and
vi) Developing City Economic Regions.
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Scaling up manufacturing in 7 strategic and frontier sectors:
16. Biopharma SHAKTI (Strategy for Healthcare Advancement
through Knowledge, Technology and Innovation) – India’s disease
burden is observed to be shifting towards non-communicable diseases,
like diabetes, cancer and autoimmune disorders. Biologic medicines are
key to longevity and quality of life at affordable costs. To develop India as
a global Biopharma manufacturing hub, I propose the Biopharma SHAKTI
with an outlay of ₹ 10,000 crores over the next 5 years. This will build the
ecosystem for domestic production of biologics and biosimilars. The
Strategy will include a Biopharma-focused network with 3 new National
Institutes of Pharmaceutical Education and Research (NIPER) and
upgrading 7 existing ones. It will also create a network of over 1000
accredited India Clinical Trials sites. We propose to strengthen the Central
Drugs Standard Control Organisation to meet global standards and
approval timeframes through a dedicated scientific review cadre and
specialists.
17. India Semiconductor Mission (ISM) 1.0 expanded India’s
semiconductor sector capabilities. Building on this,
we will launch ISM 2.0 to produce equipment and materials, design full-
stack Indian IP, and fortify supply chains. We will also focus on industry-
led research and training centres to develop technology and skilled
workforce.
18. The Electronics Components Manufacturing Scheme, launched in
April 2025 with an outlay of ₹22,919 crore, already has investment
commitments at double the target. We propose to increase the outlay to
₹40,000 crore to capitalise on the momentum.
19. A Scheme for Rare Earth Permanent Magnets was launched in
November 2025. We now propose to support the mineral-rich States of
Odisha, Kerala, Andhra Pradesh and Tamil Nadu to establish dedicated
Rare Earth Corridors to promote mining, processing, research and
manufacturing.
20. To enhance domestic chemical production and reduce import-
dependency, we will launch a Scheme to support States in establishing 3
dedicated Chemical Parks, through challenge route, on a cluster-based
plug-and-play model.
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21. Strong capital goods capability is a determinant of productivity
and quality across different sectors. Towards building this capacity, I
propose the following:
(a) Hi-Tech Tool Rooms will be established by CPSEs at 2 locations
as digitally enabled automated service bureaus that locally
design, test, and manufacture high-precision components at
scale and at lower cost.
(b) A Scheme for Enhancement of Construction and
Infrastructure Equipment (CIE) will be introduced to
strengthen domestic manufacturing of high-value and
technologically-advanced CIE. This can range from lifts in a
multi-story apartment, fire-fighting equipment, large and
small, to tunnel-boring equipment for building metros and
high-altitude roads.
(c) I also propose a Scheme for Container Manufacturing to
create a globally competitive container manufacturing
ecosystem, with a budgetary allocation of ₹10,000 crore over
a 5 year period.
22. For the labour-intensive Textile Sector, I propose an Integrated
Programme with 5 sub-parts:
(a) The National Fibre Scheme for self-reliance
in natural fibres such as silk, wool and jute,
man-made fibres, and new-age fibres;
(b) Textile Expansion and Employment Scheme to modernise
traditional clusters with capital support for machinery,
technology upgradation and common testing and
certification centres;
(c) A National Handloom and Handicraft programme to integrate
and strengthen existing schemes and ensure targeted
support for weavers and artisans;
(d) Tex-Eco Initiative to promote globally competitive and
sustainable textiles and apparels;
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(e) Samarth 2.0 to modernize and upgrade the textile skilling
ecosystem through collaboration with industry and academic
institutions.
23. Further, I propose to set up Mega Textile Parks in challenge mode.
They can also focus on bringing value addition to technical textiles.
24. I propose to launch the Mahatma Gandhi Gram Swaraj initiative
to strengthen khadi, handloom and handicrafts. This will help in global
market linkage and branding. It will streamline and support training,
skilling, quality of process and production. This will benefit our weavers,
village industries, One - District – One - Product initiative and rural youth.
25. India has the potential to emerge as a global hub for high quality,
affordable sports goods. I propose a dedicated initiative for sports goods
that will promote manufacturing, research and innovation in equipment
design as well as material sciences.
Rejuvenation of Legacy Industrial Clusters
26. I propose to introduce a Scheme to revive 200 legacy industrial
clusters to improve their cost competitiveness and efficiency through
infrastructure and technology upgradation.
Creating “Champion SMEs” and supporting micro enterprises:
27. Recognising MSMEs as a vital engine of growth, I propose a three-
pronged approach to help them grow as ‘Champions’:
Equity Support
28. I propose to introduce a dedicated ₹10,000 crore SME Growth
Fund, to create future Champions, incentivizing enterprises based on
select criteria.
29. I also propose to top up the Self-Reliant India Fund set up in 2021,
with ₹2,000 crore to continue support to micro enterprises and maintain
their access to risk capital.
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Liquidity Support
30. With TReDS, more than ₹7 lakh crore has been made available to
MSMEs. To leverage its full potential, I propose 4 measures: (i) mandate
TReDS as the transaction settlement platform for all purchases from
MSMEs by CPSEs, serving as a benchmark for other corporates; (ii)
introduce a credit guarantee support mechanism through CGTMSE for
invoice discounting on TReDS platform; (iii) link GeM with TReDS for
sharing information with financiers about government purchases from
MSMEs, encouraging cheaper and quicker financing; (iv) introduce TReDS
receivables as asset-backed securities, helping develop a secondary
market, enhancing liquidity and settlement of transactions.
Professional Support
31. Government will facilitate Professional Institutions such as ICAI,
ICSI, ICMAI to design short-term, modular courses and practical tools to
develop a cadre of ‘Corporate Mitras’, especially in Tier-II and Tier-III
towns. These accredited para-professionals will help MSMEs meet
compliance requirements at affordable costs.
Infrastructure
32. During this past decade our Government has undertaken several
initiatives for large-scale enhancement of public infrastructure including
through new financing instruments such as Infrastructure Investment
Trusts (InVITs) and Real Estate Investment Trusts (REITs) and institutions
like NIIF and NABFID. We shall continue to focus on developing
infrastructure in cities with over 5 lakh population (Tier II and Tier III),
which have expanded to become growth centres.
33. Public capex has increased manifold from ₹2 lakh crore in
FY2014-15 to an allocation of ₹11.2 lakh crore in
BE 2025-26. In FY2026-27, I propose to increase it to ₹12.2 lakh crore to
continue the momentum.
34. To strengthen the confidence of private developers regarding
risks during infrastructure development and construction phase, I
propose to set up an Infrastructure Risk Guarantee Fund to provide
prudently calibrated partial credit guarantees to lenders.
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35. Over the years, REITs have emerged as a successful instrument for
asset monetisation. I propose to accelerate recycling of significant real
estate assets of CPSEs through the setting up of dedicated REITs.
36. To promote environmentally sustainable movement of cargo, I
propose to: a) Establish new Dedicated Freight Corridors connecting
Dankuni in the East, to Surat in the West; b) operationalise 20 new
National Waterways (NW) over next 5 years, starting with NW-5 in
Odisha to connect mineral rich areas of Talcher and Angul and industrial
centres like Kalinga Nagar to the Ports of Paradeep and Dhamra. Training
Institutes will be set up as Regional Centres of Excellence for
development of the required manpower. This will benefit youth in the
entire stretch of the waterways to train and acquire skills.
Further, a ship repair ecosystem catering to inland waterways will also
be set up at Varanasi and Patna; c) launch a Coastal Cargo Promotion
Scheme for incentivising a modal shift from rail and road, to increase the
share of inland waterways and coastal shipping from 6 % to 12 % by 2047.
37. To enhance last-mile and remote connectivity, and promote
tourism, I propose to give incentives to indigenize manufacturing of
seaplanes. A Seaplane VGF Scheme will be also be introduced to provide
support for operations.
Carbon Capture Utilization and Storage (CCUS)
38. Aligning with the roadmap launched in December 2025, CCUS
technologies at scale will achieve higher readiness levels in end-use
applications across five industrial sectors, including, power, steel,
cement, refineries and chemicals. An outlay of ₹20,000 crore is proposed
over the next 5 years.
City Economic Regions
39. Cities are India’s engines of growth, innovation, and
opportunities. We shall now focus on Tier II and Tier III cities, and even
temple-towns, which need modern infrastructure and basic amenities.
This Budget aims to further amplify the potential of cities to deliver the
economic power of agglomerations by mapping city economic regions
(CER), based on their specific growth drivers. An allocation of ₹ 5000
crore per CER over 5 years is proposed for implementing their plans
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through a challenge mode with a reform-cum-results based financing
mechanism.
40. In order to promote environmentally sustainable passenger
systems, we will develop seven High-Speed Rail corridors between cities
as ‘growth connectors’, namely i) Mumbai-Pune, ii) Pune-Hyderabad, iii)
Hyderabad-Bengaluru, iv) Hyderabad-Chennai, v) Chennai-Bengaluru, vi)
Delhi-Varanasi, vii) Varanasi-Siliguri.
Financial Sector
41. The Indian banking sector today is characterised by strong balance
sheets, historic highs in profitability, improved asset quality and coverage
exceeding 98% of villages in the country. At this juncture, we are well-
placed to futuristically evaluate the measures needed to continue on the
path of reform-led growth of this sector.
42. I propose setting up a “High Level Committee on Banking for
Viksit Bharat”, to comprehensively review the sector and align it with
India’s next phase of growth, while safeguarding financial stability,
inclusion and consumer protection.
43. The vision for NBFCs for Viksit Bharat has been outlined with clear
targets for credit disbursement and technology adoption. In order to
achieve scale and improve efficiency in the Public Sector NBFCs, as a first
step, it is proposed to restructure the Power Finance Corporation and
Rural Electrification Corporation.
44. I propose a comprehensive review of the Foreign Exchange
Management (Non-debt Instruments) Rules to create a more
contemporary, user-friendly framework for foreign investments,
consistent with India’s evolving economic priorities.
Corporate Bond Market
45. I propose to introduce a market making framework with suitable
access to funds and derivatives on corporate bond indices. I also propose
to introduce total return swaps on corporate bonds.
Municipal Bonds
46. To encourage the issuance of municipal bonds of higher value by
large cities, I propose an incentive of ₹100 crore for a single bond issuance
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of more than ₹1000 crore. The current scheme under AMRUT which
incentivises issuances up to ₹200 crore, will also continue to support
smaller and medium towns.
Ease of Doing Business
47. Individual Persons Resident Outside India (PROI) will be permitted
to invest in equity instruments of listed Indian companies through the
Portfolio Investment Scheme. It is also proposed to increase the
investment limit for an individual PROI under this scheme from 5% to
10%, with an overall investment limit for all
individual PROIs to 24%, from the current 10%.
Emerging technologies, including AI
48. 21st Century is technology driven. Adoption of technology is for
the benefit of all people - farmers in the field, women in STEM, youth
keen to upskill and Divyangjan to access newer opportunities. The
Government has taken several steps to support new technologies
through AI Mission, National Quantum Mission, Anusandhan National
Research Fund, and Research, Development and Innovation Fund.
49. Our second kartavya is to fulfil aspirations and build capacity.
Close to 25 crore individuals have come out of multidimensional poverty
through a decade of our Government’s sustained and reform-oriented
efforts.
50. Our Government has therefore decided to place a renewed
emphasis on the Services Sector to provide a pathway to fulfilling
aspirations of a youthful India, with the following measures.
High-Powered ‘Education to Employment and Enterprise’ Standing
Committee
51. I propose to set up a High-Powered ‘Education to Employment
and Enterprise’ Standing Committee to recommend measures that focus
on the Services Sector as a core driver of Viksit Bharat. This will make us
a global leader in services, with a 10% global share by 2047. The
Committee will prioritise areas to optimise the potential for growth,
employment and exports. They will also assess the impact of emerging
technologies, including AI, on jobs and skill requirements and propose
measures thereof.
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Creation of Professionals for Viksit Bharat
52. To create a new range of skilled career pathways for our youth, I
propose interventions in the following sectors:
Health
53. Existing institutions for Allied Health Professionals (AHPs) will be
upgraded and new AHP Institutions established in private and
Government sectors. This will cover 10 selected disciplines, including
optometry, radiology, anesthesia, OT Technology, Applied Psychology
and Behavioural Health and add 100,000 AHPs over the
next 5 years.
54. A strong Care Ecosystem, covering geriatric and allied care
services will be built. A variety of NSQF-aligned programmes will be
developed to train multiskilled caregivers combining core care and allied
skills, such as, wellness, yoga and operation of medical and assistive
devices. In the coming year, 1.5 lakh caregivers will be trained.
Hubs for Medical Value Tourism
55. To promote India as a hub for medical tourism
services, I propose to launch a Scheme to support States in establishing
five Regional Medical Hubs, in partnership with the private sector. These
Hubs will serve as integrated healthcare complexes that combine
medical, educational and research facilities. They will have AYUSH
Centres, Medical Value Tourism Facilitation Centres and infrastructure
for diagnostics, post-care and rehabilitation. These Hubs will provide
diverse job opportunities for health professionals including doctors and
AHPs.
AYUSH
56. Ancient Indian yoga, already respected in several parts of the
world, was given mass global recognition when Hon’ble PM took it to the
UN. Post-COVID, Ayurveda gained a similar global acceptance and
recognition.
57. Exporting quality Ayurvedic products helps farmers who grow the
herbs and the youth who process the products. To meet growing global
demand, a few more steps are being taken.
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58. I propose to (i) set up 3 new All India Institutes of Ayurveda; (ii)
upgrade AYUSH pharmacies and Drug Testing Labs for higher standards
of certification ecosystem, and make available more skilled personnel;
(iii) upgrade the WHO Global Traditional Medicine Centre in Jamnagar to
bolster evidence-based research, training and awareness for traditional
medicine.
Animal Husbandry
59. Livestock contributes close to 16% of farm income, including of
poor and marginal households. To scale up availability of veterinary
professionals by more than 20,000, I propose to roll out a loan-linked
capital subsidy support scheme for establishment of veterinary and para-
vet colleges, veterinary hospitals, diagnostic laboratories and breeding
facilities in the private sector. Collaboration between Indian and foreign
institutions will also be facilitated.
Orange Economy
60. India’s Animation, Visual Effects, Gaming and Comics (AVGC)
sector is a growing industry, projected to require 2 million professionals
by 2030. I propose to support the Indian Institute of Creative
Technologies, Mumbai in setting up AVGC Content Creator Labs
in 15,000 secondary schools and 500 colleges.
Design
61. The Indian design industry is expanding rapidly and yet there is a
shortage of Indian designers. I propose to establish through challenge
route, a new National Institute of Design to boost design education and
development in the eastern region of India.
Education
62. Our Government will support States, through challenge route, in
creating 5 University Townships in the vicinity of major industrial and
logistic corridors. These planned academic zones will host multiple
universities, colleges, research institutions, skill centres and residential
complexes.
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63. In Higher Education STEM institutions, prolonged hours of study
and laboratory work pose some challenges for girl students. Through
VGF/capital support, 1 girls’ hostel will be established in every district.
64. To promote Astrophysics and Astronomy via immersive
experiences, 4 Telescope Infrastructure facilities will be set up or
upgraded - the National Large Solar Telescope, the National Large Optical-
infrared Telescope, the Himalayan Chandra Telescope and the COSMOS-
2 Planetarium.
Tourism
65. The Tourism sector has the potential to play a large role in
employment generation, forex earnings and expanding the local
economy.
66. I propose to set up a National Institute of Hospitality by
upgrading the existing National Council for Hotel Management and
Catering Technology. It will function as a bridge between academia,
industry and the Government.
67. I also propose a pilot scheme for upskilling 10,000 guides in 20
iconic tourist sites through a standardized,
high-quality 12-week training course in hybrid mode, in collaboration
with an Indian Institute of Management.
68. A National Destination Digital Knowledge Grid will be established
to digitally document all places of significance—cultural, spiritual and
heritage. This initiative will create a new ecosystem of jobs for local
researchers, historians, content creators and technology partners.
69. India has the potential and opportunity to offer world-class
trekking and hiking experience. We will develop ecologically sustainable
(i) Mountain trails in Himachal Pradesh, Uttarakhand and Jammu and
Kashmir; Araku Valley in the Eastern Ghats and Podhigai Malai in the
Western Ghats. (ii) Turtle Trails along key nesting sites in the coastal areas
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of Odisha, Karnataka and Kerala; and (iii) Bird watching trails along the
Pulikat lake in Andhra Pradesh and Tamil Nadu.
70. Under the visionary leadership of Honorable Prime Minister, we
established the International Big Cat Alliance in 2024. This year, India is
hosting the first ever Global Big Cat Summit, where heads of governments
and ministers from 95 range countries will deliberate on collective
strategies for conservation.
Heritage and Culture Tourism
71. I propose to develop 15 archeological sites including Lothal,
Dholavira, Rakhigarhi, Adichanallur, Sarnath, Hastinapur, and Leh Palace
into vibrant, experiential cultural destinations. Excavated landscapes will
be opened to the public through curated walkways.
Immersive storytelling skills and technologies will be introduced to help
conservation labs, interpretation centres, and guides.
Sports
72. The Sports Sector provides multiple means of employment,
skilling and job opportunities. Taking forward the systematic nurturing of
sports talent which is set in motion through the Khelo India
programme, I propose to launch a Khelo India Mission to transform the
Sports sector over the next decade.
73. The Mission will facilitate: a) An integrated talent development
pathway, supported by training centres (foundational, intermediate and
elite levels); b) systematic development of coaches and support staff; c)
integration of sports science and technology; d) competitions and leagues
to promote sports culture and provide platforms; and, e) development of
sports infrastructure for training and competition.
74. Our third kartavya aligns with our vision of Sabka Sath, Sabka
Vikas towards a Viksit Bharat.
75. This requires targeted efforts for a) Increasing farmer incomes
through productivity enhancement and entrepreneurship, with special
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attention to small and marginal farmers; b) Empowering Divyangjan
through access to livelihood opportunities, training and
high-quality assistive devices; c) Empowering the vulnerable to access
mental health and trauma care; d) Focus on the Purvodaya States and
the North-East Region to accelerate development and employment
opportunities.
Increasing Farmer Incomes
76. Fisheries: We will undertake initiatives (i) for integrated
development of 500 reservoirs and Amrit Sarovars
(ii) strengthen the fisheries value chain in coastal areas and enable
market linkages involving start-ups and women-led groups together with
Fish Farmers Producer Organisations.
77. Animal Husbandry: To provide quality employment opportunities
in rural and peri-urban areas, we will support the Animal Husbandry
Sector in entrepreneurship development through: (a) a Credit-Linked
Subsidy Programme (b) scaling-up and modernisation of livestock
enterprises (c) enhance creation of livestock, dairy and poultry-focused
integrated-value chains and (d) encourage creation of Livestock Farmer
Producers Organisations.
78. High Value Agriculture: To diversify farm outputs, increase
productivity, enhance farmers’ incomes, and create new employment
opportunities, we will support high value crops such as coconut,
sandalwood, cocoa and cashew in our coastal areas. Agar trees in North
East and nuts such as, almonds, walnuts and pine nuts in our hilly regions
will also be supported.
79. India is the world’s largest producer of coconuts.
About 30 million people, including nearly 10 million farmers, depend on
coconuts for their livelihood. To further enhance competitiveness in
coconut production, I propose a Coconut Promotion Scheme to increase
production and enhance productivity through various interventions
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including replacing old and non-productive trees with new
saplings/plants/varieties in major coconut growing States.
80. A dedicated programme is proposed for Indian cashew and cocoa
to make India self-reliant in raw cashew and cocoa production and
processing, enhance export competitiveness and transform Indian
Cashew and Indian Cocoa into premium global brands by 2030.
81. Sandalwood is closely linked to India’s social and cultural
heritage. Our Government will partner with State Governments to
promote focused cultivation and post-harvest processing to restore the
glory of the Indian Sandalwood ecosystem.
82. To rejuvenate old, low-yielding orchards and expand
high-density cultivation of walnuts, almonds and pine nuts, we will
support a dedicated programme to enhance farmer incomes and in
bringing value addition by engaging youth.
Bharat-VISTAAR (Virtually Integrated System to Access Agricultural
Resources)
83. I propose to launch Bharat-VISTAAR—a multilingual AI tool that
shall integrate the AgriStack portals and the ICAR package on agricultural
practices with AI systems. This will enhance farm productivity, enable
better decisions for farmers and reduce risk by providing customised
advisory support.
SHE-Marts for Rural Women-led Enterprises
84. Building on the success of the Lakhpati Didi Programme, I propose
to help women take the next step from
credit-led livelihoods to being owners of enterprises.
Self-Help Entrepreneur (SHE) Marts will be set up as community-owned
retail outlets within the cluster level federations through enhanced and
innovative financing instruments.
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Empowering Divyangjan
85. Divyangjan Kaushal Yojana: IT, AVGC sectors, Hospitality and
Food and Beverages sectors offer task-oriented and process-driven roles,
which are suitable for Divyangjans. We will ensure dignified livelihood
opportunities through industry-relevant and customized training specific
to each divyang group.
86. Divyang Sahara Yojana: Timely access to high-quality assistive
devices for all eligible Divyangjans is a fundamental need. I propose to (i)
support the Artificial Limbs Manufacturing Corporation of India (ALIMCO)
to scale up production of assistive devices, invest in R&D and AI
integration, (ii) strengthen PM Divyasha Kendras and support setting up
of Assistive Technology Marts as modern retail-style centres where
Divyangjans and senior citizens can see, try and purchase assistive
products.
Reaffirming our commitment to Mental Health and Trauma Care
87. There are no national institutes for mental healthcare in north
India. We will therefore set up a NIMHANS-2 and also upgrade National
Mental Health Institutes in Ranchi and Tezpur as Regional Apex
Institutions.
88. Emergencies expose families, particularly the poor and
vulnerable, to unexpected expenditure. We will strengthen and increase
these capacities by 50% in District Hospitals by establishing Emergency
and Trauma Care Centres.
Focus on the Purvodaya States and the North-Eastern Region
89. Purvodaya: I propose the development of an integrated East
Coast Industrial Corridor with a well-connected node at Durgapur,
creation of 5 tourism destinations in the 5 Purvodaya States, and the
provision of 4,000 e-buses.
90. Buddhist Sites in North-Eastern Region: The
North-Eastern Region is a civilizational confluence of Theravada and
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Mahayana/Vajrayana traditions. I propose to launch a Scheme for
Development of Buddhist Circuits in Arunachal Pradesh, Sikkim, Assam,
Manipur, Mizoram and Tripura. The Scheme will cover preservation of
temples and monasteries, pilgrimage interpretation centers, connectivity
and pilgrim amenities.
16th Finance Commission
91. On 17th November 2025, the 16th Finance Commission submitted
its report to the President. As mandated under Article 281 of the
Constitution, the Government is to lay the Report along with the
Explanatory Memorandum on the Action Taken Report on the
recommendations of the Commission in Parliament. The Government has
accepted the recommendation of the Commission to retain the vertical
share of devolution at 41%. As recommended by the Commission, I have
provided ₹1.4 lakh crore to the States for the FY 2026-27 as Finance
Commission Grants. These include Rural and Urban Local Body and
Disaster Management Grants.
Fiscal Consolidation
92. Government has been delivering on our fiscal commitments
consistently without compromising on social needs. To strive towards
accepted standards of fiscal management, in Budget 2025-26, I had
indicated that the Central Government would target reaching a debt-to-
GDP ratio of 50±1 percent by 2030-31.
93. In line with this, the debt-to-GDP ratio is estimated to be 55.6
percent of GDP in BE 2026-27, compared to 56.1 percent of GDP in RE
2025-26. A declining debt-to-GDP ratio will gradually free up resources
for priority sector expenditure by reducing the outgo on interest
payments.
94. One of the main operational instruments for debt targeting is the
fiscal deficit. I am happy to inform this august House that I have fulfilled
my commitment made in FY 2021-22 to reduce fiscal deficit below 4.5
percent of GDP by 2025-26. In RE 2025-26, the fiscal deficit has been
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estimated at par with BE of 2025-26 at 4.4 percent of GDP. In line with
the new fiscal prudence path of debt consolidation, the fiscal deficit in BE
2026-27 is estimated to be 4.3 percent of GDP.
Revised Estimates 2025-26
95. The Revised Estimates of the non-debt receipts
are ₹34 lakh crore of which the Centre’s net tax receipts
are ₹26.7 lakh crore. The Revised Estimate of the total expenditure is
₹49.6 lakh crore, of which the capital expenditure is about
₹11 lakh crore.
Budget Estimates 2026-27
96. Coming to 2026-27, the non-debt receipts and the
total expenditure are estimated as ₹36.5 lakh crore
and ₹53.5 lakh crore respectively. The Centre’s net tax receipts are
estimated at ₹28.7 lakh crore.
97. To finance the fiscal deficit, the net market borrowings from dated
securities are estimated at ₹11.7 lakh crore. The balance financing is
expected to come from small savings and other sources. The gross market
borrowings are estimated at ₹17.2 lakh crore.
I will now move to Part B.
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PART B
Direct Taxes
Speaker Sir,
98. Now I present my proposals on Direct Taxes.
New Income Tax Act
99. In July 2024, I announced a comprehensive review of the
Income Tax Act, 1961. This was completed in a record time and the
Income Tax Act, 2025 will come into effect from 1st April, 2026.
100. The simplified Income Tax Rules and Forms will be notified
shortly, giving adequate time to taxpayers to acquaint themselves
with its requirements.
101. The forms have been redesigned such that ordinary citizens
can comply without difficulty.
Ease of Living
102. I propose that any interest awarded by the
Motor Accident Claims Tribunal to a natural person will be exempt
from Income Tax, and any TDS on this account will be done away
with.
103. I propose to reduce TCS rate on the sale of overseas tour
program package from the current 5 percent
and 20 percent to 2 percent without any stipulation of amount.
104. I propose to reduce TCS rate for pursuing education and for
medical purposes under the Liberalized Remittance Scheme (LRS)
from 5 percent to 2 percent.
105. Supply of manpower services is proposed to be specifically
brought within the ambit of payment to contractors for the purpose
of TDS to avoid ambiguity. Thus, TDS on these services will be at the
rate of either 1 percent or 2 percent only.
106. I propose a scheme for small taxpayers wherein
a rule-based automated process will enable obtaining a lower or nil
deduction certificate instead of filing an application with the
assessing officer.
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107. For the ease of taxpayers holding securities in multiple
companies, I propose to enable depositories to accept Form 15G or
Form 15H from the investor and provide it directly to various relevant
companies.
108. fee.
I propose to extend time available for revising returns from
31st December to up to 31st March with the payment of a nominal
109. I also propose to stagger the timeline for filing of tax returns.
Individuals with ITR 1 and ITR 2 returns will continue to file till 31st
July and non-audit business cases or trusts are proposed to be
allowed timetill 31st August.
110. TDS on the sale of immovable property by a
non-resident is proposed to be deducted and deposited through
resident buyer’s PAN based challan instead of requiring TAN.
111. To address practical issues of small taxpayers like students,
young professionals, tech employees, relocated NRIs, and such
others, I propose to introduce a one-time 6-month foreign asset
disclosure scheme for these taxpayers to disclose income or assets
below a certain size.
112. taxpayers namely,
This scheme would be applicable for two categories of
(A) who did not disclose their overseas income or asset and
(B) who disclosed their overseas income and/or paid due tax, but
could not declare the asset acquired.
For category (A), the limit of undisclosed income/asset is proposed to
be up to 1 crore rupees. They need to pay 30 percent of Fair Market
Value of asset or 30 percent of undisclosed income as tax and 30
percent as additional income tax in lieu of penalty and would thereby
get immunity from prosecution.
For category (B), asset value is proposed to be
up to 5 crore rupees. Here, immunity from both penalty and
prosecution will be available with the payment of fee
of 1 lakh rupees.
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Rationalizing Penalty and Prosecution
113. Multiplicity of proceedings are a hindrance to the ease of
doing business. I propose to integrate assessment & penalty
proceedings by way of a common order for both. There will be no
interest liability on the taxpayer on the penalty amount for the period
of appeal before the first appellate authority irrespective of the
outcome of appeal process. Further, quantum of pre-payment is
being reduced from 20 percent to 10 percent and will continue to be
calculated only on core tax demand.
114. As an additional measure for reducing litigation,
I propose to allow taxpayers to update their returns even after
reassessment proceedings have been initiated, at an additional 10
percent tax rate over and above the rate applicable for the relevant
year. The assessing officer will then use only this updated return in
his proceedings.
115. There is already a framework for immunity from penalty and
prosecution in the cases of underreporting. I propose to apply this
framework of immunity to misreporting too. However, in such a case
the taxpayer will need to pay 100 percent of the tax amount as an
additional income tax over and above the tax and interest due.
116. Penalties for certain technical defaults such as failure to get
accounts audited, non-furnishing of transfer pricing audit report and
default in furnishing statement for financial transactions, are
proposed to be converted into fee.
117. I propose to rationalise prosecution framework under the
Income Tax Act while maintaining a careful balance for deterrence in
some serious offences.
118. Non-production of books of account and documents, and
requirement of TDS payment, where payment is made in kind, are
being decriminalised. Further, minor offences will attract fine only.
119. The remaining prosecutions will be graded commensurate
with the quantum of offence. They will entail only simple
imprisonment, with maximum imprisonment reduced to two years,
and power to courts to convert even those into fine.
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120. There is no penalty presently for non-disclosure of non-
immovable foreign assets with aggregate value less than 20 lakh
rupees. I propose to also provide them with immunity from
prosecution with retrospective effect from 1.10.2024.
Cooperatives
121. Deduction is already allowed to a primary cooperative society
engaged in supplying milk, oilseeds, fruits or vegetables raised or
grown by its members. I propose to extend this deduction to also
include supply of cattle feed and cotton seed produced by its
members.
122. I propose to allow inter-cooperative society dividend income
as deduction under the new tax regime to the extent it is further
distributed to its members.
123. I further propose to allow exemption for a period
of 3 years, to dividend income received by a notified national co-
operative federation, on their investments made in companies up to
31.1.2026. This exemption would be allowed only for dividends
further distributed to its member co-operatives.
Supporting IT sector as India’s growth engine
124. India is a global leader in software development services, IT
enabled services, knowledge process outsourcing services and
contract R&D services relating to software development. These
business segments are quite inter-connected with each other.
125. All these services are proposed to be clubbed under a single
category of Information Technology Services
with a common safe harbour margin of 15.5 percent applicable to all.
126. The threshold for availing safe harbour for IT services is being
enhanced substantially from 300 crore rupees to 2,000 crore rupees.
127. Safe harbour for IT services shall be approved by an
automated rule-driven process without any need for tax officer to
examine and accept the application. Once applied by an IT Services
company, the same safe harbour can be continued for a period of 5
years at a stretch at its choice.
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128. For IT services companies who want to conclude Advance
Pricing Agreement (APA), I propose to fast track Unilateral APA
process for IT services and endeavour to conclude it within a period
of 2 years. The period of 2 years can be extended by a further period
of 6 months on taxpayer’s request.
129. I propose to extend the facility of modified returns available
to the entity entering APA to its associated entities also.
Attracting global business and investment
130. Recognising the need to enable critical infrastructure and
boost investment in data centres, I propose to provide tax holiday till
2047 to any foreign company that provides cloud services to
customers globally by using data centre services from India. It will,
however, need to provide services to Indian customers through an
Indian reseller entity.
131. I also propose to provide a safe harbour of 15 percent on cost
in case the company providing data centre services from India is a
related entity.
132. To harness the efficiency of just-in-time logistics for electronic
manufacturing, I propose to provide safe harbour to non-residents
for component warehousing in a bonded warehouse at a profit
margin of 2 percent of the invoice value. The resultant tax of about
0.7 percent will be much lower than in competing jurisdictions.
133. To provide fillip to toll manufacturing in India,
I propose to provide exemption from income tax
for 5 years, to any non-resident who provides capital goods,
equipment or tooling, to any toll manufacturer in a bonded zone.
134. To encourage vast pool of global talent to work in India for a
longer period of time, I propose to provide exemption to global (non-
India sourced) income of a non-resident expert, for a stay period of 5
years under notified schemes.
135. I propose to provide exemption from Minimum Alternate Tax
(MAT) to all non-residents who pay tax on presumptive basis.
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Tax administration
136. I propose to constitute a Joint Committee of Ministry of
Corporate Affairs and Central Board of Direct Taxes for incorporating
the requirements of Income Computation and Disclosure Standards
(ICDS) in the Indian Accounting Standards (IndAS) itself. Separate
accounting requirement based on ICDS will be done away with from
the tax year 2027-28.
137. To support PM Modi’s vision of home-grown accounting and
advisory firms to become global leaders, I propose to rationalise the
definition of accountant for the purposes of Safe Harbour Rules.
Other Tax proposals
138. Change in taxation of buyback was brought in to address the
improper use of buyback route by promoters. In the interest of
minority shareholders, I propose to tax buyback for all types of
shareholders as Capital Gains. However, to disincentivize misuse of
tax arbitrage, promoters will pay an additional buyback tax. This will
make effective tax 22 percent for corporate promoters. For non-
corporate promoters the effective tax will be 30 percent.
139. TCS rate for sellers of specific goods namely alcoholic liquor,
scrap and minerals will be rationalized to 2 percent and that on tendu
leaves will be reduced from 5 percent to 2 percent.
140. I propose to raise the STT on Futures to 0.05 percent from
present 0.02 percent. STT on options premium and exercise of
options are both proposed to be raised to 0.15 percent from the
present rate of 0.1 percent and 0.125 percent respectively.
141. We reformed the taxation landscape for corporates in 2019
by providing them a simplified regime with lower tax rate so that they
could productively focus on business rather than on claim of
deductions and exemptions.
142. To encourage companies to shift to the new regime, set-off of
brought forward MAT credit is proposed to be allowed to companies
only in the new regime. Set-off using available MAT credit is proposed
to be allowed to an extent of 1/4th of the tax liability in the new
regime.
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143. MAT is proposed to be made final tax. So, there will be no
further credit accumulation from 1st April 2026.
In line with this change, the rate of final tax is being reduced to 14
percent from the current MAT rate
of 15 percent. The brought forward MAT credit of taxpayers
accumulated till 31st March 2026, will continue to be available to
them for set-off as above.
Indirect Taxes
144. I shall now take up proposals related to Indirect Taxes. My
proposals for Customs and Central Excise
aim to further simplify the tariff structure, support domestic
manufacturing, promote export competitiveness, and correct
inversion in duty.
Review of exemptions and tariff simplification
145. To continue weeding out long continuing customs duty
exemptions, I propose to remove certain exemptions on items which
are being manufactured in India or where the imports are negligible.
Similarly, to further simplify the process of ascertaining the rate of
duty applicable on a particular item, I propose to incorporate certain
effective rates in various customs notifications to the tariff schedule
itself.
146. I shall now take up sector specific proposals.
Promotion of exports of marine, leather, and textile products
147. I propose to increase the limit for duty-free imports of
specified inputs used for processing seafood products for export,
from the current 1 per cent to 3 per cent of the FOB value of the
previous year’s export turnover.
148. I also propose to allow duty-free imports of specified inputs,
which is currently available for exports of leather or synthetic
footwear, to exports of Shoe Uppers as well.
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149. I propose to extend the time period for export of final product
from the existing 6 months to 1 year, for exporters of leather or
textile garments, leather or synthetic footwear and other leather
products.
Energy transition and security
150. I propose to extend the basic customs duty exemption given
to capital goods used for manufacturing Lithium-Ion Cells for
batteries, to those used for manufacturing Lithium-Ion Cells for
battery energy storage systems too.
151. I propose to exempt basic customs duty on import of sodium
antimonate for use in manufacture of solar glass.
Nuclear Power
152. I propose to extend the existing basic customs duty
exemption on imports of goods required for Nuclear Power Projects
till the year 2035 and expand it for all nuclear plants irrespective of
their capacity.
Critical Minerals
153. It is proposed to provide basic customs duty exemption to the
import of capital goods required for processing of critical minerals in
India.
Biogas blended CNG
154. I propose to exclude the entire value of biogas
while calculating the Central Excise duty payable on biogas blended
CNG.
Civil and Defence Aviation
155. I propose to exempt basic customs duty on components and
parts required for the manufacture of civilian, training and other
aircrafts.
156. It is proposed to exempt basic customs duty on raw materials
imported for manufacture of parts of aircraft to be used in
maintenance, repair, or overhaul requirements by Units in the
Defence sector.
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Electronics
157. To deepen value addition in the consumer electronics sector,
I propose to exempt basic customs duty on specified parts used in the
manufacture of microwave ovens.
Special Economic Zone
158. To address the concerns arising about utilization of capacities
by manufacturing units in the Special Economic Zones due to global
trade disruptions, I propose, as a special one-time measure,
to facilitate sales by eligible manufacturing units in SEZs to the
Domestic Tariff Area (DTA) at concessional rates of duty. The quantity
of such sales will be limited to a prescribed proportion of their
exports. Necessary regulatory changes will be undertaken to
operationalise these measures while ensuring level-playing field for
the units working in the DTA.
Ease of Living
159. To rationalize the customs duty structure for goods imported
for personal use, I propose to reduce the tariff rate on all dutiable
goods imported for personal use from 20 per cent to 10 per cent.
160. To provide relief to patients, particularly those suffering from
cancer, I propose to exempt basic customs duty on 17 drugs or
medicines.
161. I also propose to ⁠add 7 more rare diseases for the purposes of
exempting import duties on personal imports of drugs, medicines
and Food for Special Medical Purposes (FSMP) used in their
treatment.
Customs Process
162. India's role and share in global trade is poised for a major leap,
in line with our ambition and journey towards 'Viksit Bharat'. In this
regard, I propose many measures for custom processes to have
minimal intervention for smoother and faster movement
of goods and greater certainty to the trade.
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Trust-based systems
163. I propose to enhance duty deferral period for
Tier 2 and Tier 3 Authorised Economic Operators, known as AEOs,
from 15 days to 30 days.
164. I propose to provide eligible manufacturer-importers the
same duty deferral facility. This should encourage them to get
themselves accredited as a full-fledged Tier 3- AEO in due course.
165. To provide greater certainty and for better business planning,
I propose to extend validity period of advance ruling, binding on
Customs, from the present 3 years to 5 years.
166. In the spirit of whole-of-the-government approach,
Government agencies will be encouraged to leverage AEO
accreditation for preferential treatment in clearing their cargo.
167. Regular importers with trusted longstanding supply chains
will be recognized in the risk system, so that the need for verification
of their cargo every time can be minimized. Export cargo using
electronic sealing will be provided through clearance from the factory
premises to the ship.
168. For import of goods not needing any compliance, filing of bill
of entry by a trusted importer, and arrival of goods will automatically
notify Customs for completing their clearance formalities. This will
enable goods to be released immediately on arrival.
169. The Customs warehousing framework will be transformed
into a warehouse operator-centric system with self-declarations,
electronic tracking and risk-based audit. These reforms will move
away from the current system of officer-dependent approvals, and
reduce transaction delays and compliance costs.
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Ease of Doing Business
170. Approvals required for cargo clearance from various
Government agencies will be seamlessly processed through a single
and interconnected digital window by the end of the financial year.
Processes involved in clearance of food, drugs, plant, animal & wild
life products, accounting for around 70 percent of interdicted cargo,
will be operationalised on this system by April 2026 itself.
171. For goods not having any compliance requirement, clearance
will be done by Customs immediately after online registration is
completed by the importer, subject to the payment of duty.
172. Customs Integrated System (CIS) will be rolled out
in 2 years as a single, integrated and scalable platform for all the
customs processes.
173. Utilization of non-intrusive scanning with advanced imaging
and AI technology for risk assessment will be expanded in a phased
manner with the objective to scan every container across all the
major ports.
New export opportunities
174. To support Indian fishermen to fully harness the economic value
of marine resources beyond our territorial waters, the following measures
will be taken.
a. Fish catch by an Indian fishing vessel in Exclusive Economic Zone
(EEZ) or on the High Seas will be made free of duty.
b. Landing of such fish on foreign port will be treated as export of
goods.
Safeguards will be put in place to prevent misuse during fish catch, transit
and transshipment.
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175. To support aspirations of India’s small businesses, artisans and
start-ups to access global markets through e-commerce, I am pleased to
announce complete removal of the current value cap of ₹10 lakh per
consignment on courier exports. In addition, handling of rejected and
returned consignments will be improved with effective use of technology
for identifying such consignments.
Ease of Living
176. I propose to revise provisions governing baggage clearance during
international travel to address genuine concerns of passengers. The
revised rules will enhance duty-free allowances in line with the present-
day travel realities and provide clarity in temporary carriage of goods
brought in or taken out.
177. There are honest taxpayers who are willing to settle disputes by
paying all their dues. But they get deterred due to negative connotation
associated with penalty. They will now be able close cases by paying an
additional amount in lieu of penalty.
Honourable Speaker Sir, with this, I commend the Budget to this august
House.
Jai Hind!
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Annexure to Part A
Indicative Terms of Reference of the High-Level Education-to-Employment
and Enterprise Standing Committee
i. identify services sub-sectors with potential for growth,
employment and exports, identify sector-specific gaps and
measures to unlock employment potential;
ii. iii. iv. v. vi. vii. viii. ix. identify cross-sectoral policy and regulatory issues, including
standards-setting and accreditation;
examine areas for services export;
assess the impact of emerging technologies, including AI, on jobs
and skill requirements;
propose specific measures for embedding AI in the education
curriculum from school level onwards and upgrading State
Councils of Educational Research and Training institutes for
teacher training;
propose measures for upskilling and re-skilling of technology
professionals/engineers in AI and emerging technologies; and
Propose measures for AI enabled matching of worders, jobs and
training opportunities; and
propose measures to make the informal workflow visible,
verifiable and future-ready, to enhance upward mobility
prospects; and
propose steps to be taken to attract skilled diaspora and foreign
talent into the country.
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Annexure to Part B
Amendments relating to Direct Taxes
1. EASE OF LIVING
(i) Exemption of interest on compensation amount awarded by Motor
Accident Claims Tribunal (MACT)
 In order to alleviate the sufferings of victims of motor vehicle
accident and their family, it is proposed that any interest awarded
on compensation amount in the case of individual awarded by
MACT shall be exempt.
 It is also proposed that in case of an individual, no tax shall be
deducted at source for such interest, irrespective of the amount
of interest awarded by MACT.
(ii) Removal of ambiguity on the application of rate of TDS on account
of supply of manpower
 It is proposed to include supply of manpower within the definition
of “work” under section 402(47) of the Income-tax Act, 2025 so as
to provide that tax on such supply of manpower shall be deducted
at source as “payment to contractors” under the provisions of
section 393(1) [Table: Sl. No. 6(i) and (ii)] and not under the
provisions of “fee for professional services” under section 393(1)
[Table: Sl. No. (iii)].
(iii) Enabling electronic verification and issuance of certificate for
deduction of income-tax at lower rate or no deduction of income-tax
 It is proposed to ease the compliance burden of small taxpayers
by providing an online option to the payee, to apply for issuance
of certificate for lower or nil deduction of income-tax which is
proposed to be issued online after electronic verification.
(iv) Enabling filing of declaration for no deduction of tax at source under
section 393(6) of the Income-tax Act, 2025 to the depository
 It is proposed to allow filing of the declaration by a taxpayer for
no deduction of tax at source, to a depository, where income is of
34
the nature: (i) income from units of a mutual fund (ii) interest
income from securities and (iii) dividends. This will address the
present requirements of an investor to file separate declaration
to different payers. The depositories shall in turn report such
declarations to the person responsible for payment of such
income
 It is also proposed that the person responsible for paying such
income shall furnish the declaration received by it from the
taxpayer to the Department on quarterly basis rather on monthly
basis as at present.
(v) Extending time to file revised return or belated return.
 Presently revised return can be filed upto 31st December following
the tax year. Return filing period extends upto October 31st for
persons engaged in international transactions under section 92E.
In this regard, it is proposed to allow extending the time of filing
revised return upto 31st March following the tax year. This revised
return can be of original return or belated return. A nominal fee
of Rs. 1000 or 5000 is also proposed where the revision of original
or belated return is made after 31st December depending upon
whether the income is upto or more than Rs. 5 lakh.
(vi) Change in due date of filing Income-tax Return for non-auditable
business and trusts
 It is proposed to provide staggered time line for filing of tax
returns due on the 31st of July. Individuals filing ITR 1 and ITR 2
shall continue to file tax returns by the 31st July and for non-audit
business cases or trusts, 31st August shall be the due date.
(vii) Reduction of compliance on sale of immovable property by non-
resident to resident individual or HUF
 It is proposed to provide that resident individual or HUF, shall not
be required to obtain tax deduction and collection account
number (TAN) to deduct tax at source in respect of any
35
consideration on transfer of any immovable property by non-
resident under section 393(2) [Table Sl. No. 17]. Instead, the
deduction shall be reported by quoting the PAN in same manner
as transaction of similar nature between two residents.
(viii) Rationalising the due date to deposit employee contribution by the
employer to claim such contribution as deduction
 It is proposed that deduction of any amount of contribution
received by the assessee being an employer, from an employee,
shall be allowed as deduction in the hands of the assessee if such
amount is credited by the assessee to the account of the
employee, in any provident fund or superannuation fund or any
fund set up under the provisions of the Employees’ State
Insurance Act, on or before the due date of filing of his return of
income under section 263(1) of the Act.
(ix) Rationalising the provision related to computation of profits and
gains of an insurance business other than life insurance business
 It is proposed that any amount which had earlier been added to
the income of non-life insurance business, as tax was not
deducted or paid as per the provisions of section 35(b)(i) or (ii) of
the Act, shall be allowed as deduction in the tax year in which tax
is deducted or paid as per the provisions of section 35(b)(i) or (ii)
of the Act.
(x) Introduction of Foreign Assets of Small Taxpayers – Disclosure
Scheme (FAST – DS), 2026
 It is proposed to introduce a time-bound scheme for declaration
of foreign assets and foreign sourced income for taxpayers
involving amounts below certain threshold.
2. RATIONALISING PENALTY AND PROSECUTION
(i) Reduction in multiplicity of proceedings
 Presently, penalty proceedings are initiated after completion of
the assessment proceedings. This takes a long time for finalising
issues emerging out of any assessment. Multiplicity of
proceedings increases number of pending appeals, cost of
litigation and compliance. With a view to provide fast-track
36
settlement of disputes, it is proposed to integrate assessment &
penalty proceedings by way of a common order after providing
reasonable opportunity to the taxpayer to explain the issue.
 To provide relief to taxpayers on account of increase in quantum
of demand which may arise as a result, it is proposed that the
interest on penalty would be kept in abeyance during the
pendency of appeal before first appellate authority.
(ii) Immunity from penalty from underreporting in consequence of
misreporting of income and prosecution in such cases
 There are broadly two kind of penalties –
(i) underreporting of income due to mistakes or oversight
where penalty is 50% on tax amount and framework to
underreporting of income in consequence of misreporting
of income
(ii) underreporting in consequence of misreporting of income
on account of giving wrong or faulty information or
misrepresenting the type of income where the penalty is
200% on tax amount.
There is already a framework for immunity from penalty and
prosecution, under section 478 and 479 of the Act, if the penalty is
initiated for underreporting of income. In this regard, it is proposed
to extend the same on payment of 100% of tax amount as
additional income-tax. However, the misreporting of income in
respect of unexplained cash credit, etc. is proposed to be settled
with a payment of 120% of the tax. In such cases immunity shall not
be granted where prosecution is initiated as per provision of
chapter-XXII of the Act.
(iii) Conversion of penalty to fee
 It is proposed to convert
(i) penalty for failure to get accounts audited,
(ii) penalty for non-furnishing of TP report and
37
(iii) penalty for default in furnishing statement for financial
transactions or reportable accounts into fee to be charged per
day of the default subject to a maximum ceiling.
(iv) Rationalization of the prosecution framework
 It is proposed that production of books of account and
documents, and requirement of ensuring payment of TDS from
the deductee where payment is made in kind, be completely
decriminalised.
 It is further proposed that all prosecutions shall be rationalised to
simple imprisonment instead of rigorous imprisonment.
 Maximum punishment for any offence (except for repeated
offence) is proposed to be reduced to 2 years instead of 7 years.
 In cases where presently the maximum punishment is two years,
the punishment has been reduced to 6 months with or without
fine and with no minimum imprisonment.
 It is further proposed that prosecution for the offences under
Income-tax Act, 2025 shall be based on the amount of tax evaded
and the punishment shall be proportionate to the gravity of crime.
In such cases, the requirement of maximum punishment of
imprisonment has been done away with apart from relaxing the
requirement of mandatory fine to optional.
 It is further proposed, for minor offence, only fine shall be
provided as a punishment.
(v) Rationalising the tax rate for special income charged under section
195 of the Act
 Presently there is special tax rate on certain incomes like income
in the nature of cash credits, unexplained investments, etc. The
tax rate is 60% and penalty is 10% of tax. It is proposed to
rationalise the tax rate to 30% on these incomes. Penalty on such
amount would be merged with penalty for underreporting of
income in consequence of misreporting of income that is 200% of
tax amount.
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(vi) Relaxation of search assessment in case of person other than the
searched person in certain situation
 Provisions for assessment in search cases was introduced by
Finance (No. 2) Act, 2024. In the new scheme, where
incriminating material pertaining to other person, relates only to
a single tax year, the other person is also required to undergo the
full block assessment procedure, resulting in an increased
compliance burden on such person against whom no search or
requisition was initiated.
 It is proposed to limit the period of block in case of other person,
where the undisclosed income of the other person pertains only
to one tax year. The definition of block period is accordingly
proposed to be amended in such cases.
(vii) Time limit to complete search assessment
 It is also proposed to amend section 296 of the Income-tax Act,
2025 so as to take the date of initiation of search as the reference
point to decide the date of limitation for block assessment and
consequently, the period of twelve months is proposed to be
extended to eighteen months in the case of specified person.
(viii) Extending the scope of filing of updated return
 There is facility for updating tax returns where the taxpayer wants
to show any additional income. This facility is available for a
period of 4 years for an additional tax liability of 25%, 50%, 60%,
70% from the first to the fourth year after the relevant tax year
when the return of income required to be filed for the first time.
To provide additional measure for reducing litigation, it is
proposed to allow the taxpayer to update the return even after
reassessment proceedings have been initiated. The updation is
proposed to be enabled at an additional 10% tax rate over and
above the rate applicable for relevant year.
39
 It is further proposed to allow filing of updated return in cases
where tax payer reduces the amount of loss filed in original return
under section 263(1).
 It is further proposed that where the taxpayer files updated return
and reports additional income then penalty shall not be leviable
on such additional income.
(ix) Immunity from prosecution under the Black Money Act
 Under the Black Money (Undisclosed Foreign Income and Assets)
and Imposition of Tax Act, 2015, there is no penalty for non-
disclosure of non-immovable assets with aggregate value less
than twenty lakh rupees. It is proposed to extend this immunity
for prosecution in such cases with retrospective effect from
1.10.2024.
(x) Penalty provision for non-furnishing of statement or furnishing
inaccurate information in a statement on transaction of crypto-assets
 To ensure compliance to the provisions of section 509 of the
Income-tax Act, 2025 and create a deterrence for non-furnishing
of statement or for furnishing inaccurate information in respect of
crypto assets in such statement, it is proposed to introduce
penalty provision. Penalty of Rs. 200 per day for non-furnishing of
statement and Rs. 50,000 for furnishing inaccurate particulars and
failure to correct such inaccuracy is proposed to be levied.
3. COOPERATIVES
(i) Deduction of profit and gains to a primary co-operative where they
supply cattle feed and cotton seed to a federal co-operative.
 Deduction of profit and gains is presently allowed to a primary
cooperative society engaged in supplying milk, oilseeds, fruits or
vegetables raised or grown by its members to a federal
cooperative society and others engaged in the same activities. It
is proposed to extend this deduction to a primary co-operative
engaged in supplying of cattle feed and cotton seed to, inter alia,
a federal co-operative or government organizations.
40
(ii) Deduction of inter-cooperative society dividend income under the
new tax regime.
 The dividend received by a cooperative society from another
cooperative society is allowed as a deduction in the old tax
regime. Non-allowance of this deduction in the new tax regime
may result in double taxation as it may be taxed in the hands of
the members on further distribution by the cooperative societies.
Therefore, it is proposed to allow the inter-cooperative society
dividend income as deduction under the new tax regime to the
extent it is further distributed to the members.
(iii) Deduction of dividend income received by a notified national co-
operative federation in the new tax regime.
 It is proposed to allow exemption to dividend income received by
a notified national federal cooperative from a company for a
period of three years. This deduction is limited to the dividend
received on investments made till 31.1.2026.
 Further, this exemption would be allowed only to the extent that
the dividends are further distributed to the members of the co-
operatives.
4. ATTRACTING GLOBAL BUSINESS AND INVESTMENT
(i) Tax holiday up to 2047 to any foreign company who provides services
by procuring data centre services in India
 Recognising the need to enable crical infrastructure and boost
investment in data centres, it is proposed to provide a tax holiday
up to 2047 to any foreign company who provides services to any
part of the world outside India by procuring data centre services
in India. Sale of such services to Indian users shall be made
through an Indian reseller enty and taxed appropriately.
 It is also proposed to provide a safe harbour of 15% to the resident
enty providing data centre services to a related foreign company
(who is providing cloud services to any part of the world outside
India).
41
(ii) Fillip to toll manufacturing engaged in manufacturing of electronic
goods
 To provide fillip to toll manufacturing in India, it is proposed to
provide exemption to any foreign company who provides capital
goods, equipment and tooling to any toll manufacturer in a
bonded zone who is engaged in manufacturing of electronic
goods. The exemption is proposed for a period of five tax years
beginning on 1st April, 2026.
(iii) Exemption to the global income (other than Indian sourced income)
to an expert who visits India and stays for a longer period
 To enable vast pool of global talent to come and work in India for
a longer period of time, there is a need to provide tax certainty to
them that only their Indian sourced income will be taxed in India
despite their long period of stay.
 Accordingly, it is proposed to provide exemption to the global
income (other than Indian sourced income) to an expert who visits
India and stays for a period of five years. The expert visiting India
should have been a non-resident in the previous five years when
he visits India and should be providing services under notified
Government scheme.
(iv) Exemption from MAT to non-residents availing presumptive
taxation scheme
 Non-residents who avail presumptive scheme of taxation are
exempt from applicability of Minimum Alternate Tax (MAT)
provisions. It is proposed to extend such exemption from MAT to
all non-residents who pay tax on a presumptive basis.
(v) Incentivizing prospecting and exploration of critical minerals
 In order to incentivise the prospecting and exploration of the
critical minerals, it is proposed to include certain critical minerals
in the list of minerals in Schedule XII of the Act, thereby making
42
expenditure on prospecting and exploring of such critical minerals
eligible for deduction as per the provision of section 51 of the Act.
(vi) Extension of period of deduction for units in IFSC and rationalization
of tax rate
 To increase the competitiveness of IFSC, it is proposed to increase
the period of deduction under section 147 to 20 consecutive years
out of 25 years for units in IFSC and 20 consecutive years for
OBUs. It is also proposed that the business income of these units
from IFSC after the expiry of period of deduction will be taxed at
rate of 15%.
(vii) Rationalization of certain terms for treasury centres in IFSC
 It is proposed to rationalize the provisions of deemed dividend
applicable to treasury centre in IFSC by providing that provisions
of deemed dividend shall not be applicable if
(i) the parent entity or the principal of the group shall be listed
in a country or territory outside India; and
(ii) such parent or principal entity and other group entity to the
transaction is located in a country or territory outside India
as may specified by the Central Government, by notification
in the Official Gazette.
5. RATIONALISATION OF CORPORATE TAX REGIME
(i) Reduction of rate of Minimum Alternate Tax (MAT) and allowance of
set-off of brought forward MAT credit to companies shifting to the new
tax regime
 To enable companies to shift to the new regime, MAT is proposed
to be made as a final tax and the corresponding rate is reduced
from 15% to 14%. There shall be no allowance of credit in future
tax years in respect of such payment.
43
 Further, the set-off of any brought forward MAT credit available
from prior to tax year 2026-27 will only be allowed to domestic
companies which shift henceforth to the new regime.
 This set-off of MAT credit brought forward as on 1/4/2026 is
proposed to be allowed in the new tax regime to domestic
companies to the extent of 25% of their tax liability.
 The brought forward MAT credit shall be available only up to
fifteenth year from the year when the corresponding credit was
first available.
 In the case of foreign companies, set off is proposed to be allowed
to the extent of the difference between the tax on the total
income and the minimum alternate tax, for the tax year in which
normal tax is more than MAT.
6. RATIONALISATION OF OTHER DIRECT TAX PROVISIONS
(i) Rationalisation of share buyback
 It is proposed to provide that consideration received by a
shareholder on buy-back shall be chargeable to tax under the
head “Capital Gains” instead of being treated as dividend income.
It is also proposed to provide for a differential rate for promoters
wherein the effective rate on gains in buyback will be 22% for
promoters which are domestic companies and 30% for promoters
other than domestic companies.
(ii) Rationalisation of tax collection at source (TCS) rates
 It is proposed to reduce multiplicity of TCS rates. Also, certain TCS
rates are rationalised to address the cash flow issues on this
account.
Sl.
No.
Nature of receipt Current Rate Proposed Rate
1 Sale of alcoholic liquor
for human consumption.
1%. 2%.
2 Sale of tendu leaves. 5%. 2%.
3 Sale of scrap. 1%. 2%.
44
Sl.
No.
Nature of receipt Current Rate Proposed Rate
4 Sale of minerals, being
coal or lignite or iron ore.
1%. 2%.
5 Remittance under the
Liberalised Remittance
Scheme of an amount or
aggregate of the
amounts exceeding ten
lakh rupees—
(a) 5% for
purposes of
education or
medical
treatment;
(b) 20% for
purposes other
than education
or medical
treatment.
(a) 2% for
purposes of
education or
medical
treatment;
(b) 20% for
purposes other
than education
or medical
treatment.
6 Sale of “overseas tour
programme package”
including expenses for
travel or hotel stay or
boarding or lodging or
any such similar or
related expenditure.
(a) 5% of
amount or
aggregate of
amounts up to
ten lakh rupees;
(b) 20% of
amount or
aggregate of
amounts
exceeding ten
lakh rupees.
2%
(iii) STT rate increase
 To provide reasonable course correction in F&O segment in the
capital market and generate additional revenues for the
Government, it is proposed to raise the STT on Futures to 0.05%
from present 0.02%.
 STT on options premium and exercise of options is proposed to be
raised to 0.15% from the present rate of 0.1% and 0.125%
respectively.
45
(iv) Capital Gains Exemption for Sovereign Gold Bonds
 It is proposed to provide that the exemption from capital gains tax
in respect of Sovereign Gold Bonds shall be available only where
such bonds are subscribed to by an individual at the time of
original issue and are held continuously until redemption on
maturity,
 It is also proposed to provide that this exemption applies
uniformly to all issuances of Sovereign Gold Bonds by the Reserve
Bank of India.
(v) Rationalisation of Schedule XI relating to Recognised Provident
Funds
 It is proposed to amend Schedule XI to rationalise the provisions
relating to recognised provident funds by deleting parity-based
and percentage-based limits on employer contributions,
removing salary-linked relaxations and shareholder-based
distinctions, aligning eligibility for recognition with exemption
under section 17 of the Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952, and modifying investment-
related provisions to remove rigid statutory caps inconsistent with
prevailing EPFO norms.
(vi) Removal of Interest Deduction against Dividend and Mutual Fund
Income
 It is proposed to provide that no deduction shall be allowed in
respect of any interest expenditure incurred in relation to
dividend income or income from units of mutual funds, and to
omit the existing provision permitting such deduction subject to a
specified ceiling.
46
(vii) Enabling provision to provide clarity on situations where an amount
which has been claimed as deduction or which has not been added in
the total income will be deemed income
 It is proposed that where any sum has been allowed as deduction
or has not been included in the total income under the repealed
Income-tax Act, 1961, such sum will be deemed to be income
under Income-tax Act, 2025, even without violations of any
conditions, if it was to be included in the total income under the
provisions of Income-tax Act, 1961 had it not been repealed.
(viii) Rationalising the provisions related to tonnage tax scheme
 It is proposed to rationalise the tonnage tax scheme provisions to
align it with the Inland Vessels Act, 2021 and rules made
thereunder.
(ix) Disability Pension for Armed Forces
 It is proposed to provide a specific exemption for disability
pension granted to members of the Armed Forces including
paramilitary personnel, covering both the service element and the
disability element, where the individual has been invalided out of
service on account of a bodily disability attributable to, or
aggravated by, military, naval or air force service, and to exclude
cases of retirement on superannuation or otherwise.
(x) Exemption on income in respect of compulsory acquisition of any
land under RFCTLARR Act
 In order to specifically provide exemption for acquisition of land
under the provisions of Right to Fair Compensation and
Transparency in Land Acquisition, Rehabilitation and
47
Resettlement Act, 2013, it is proposed to provide exemption to an
individual or a Hindu undivided family on any income in respect of
any award or agreement made on account of compulsory
acquisition of any land under the said Act (other than the award
or agreement made under section 46 of said Act).
(xi) Facility to the associated entity of the person entering into Advance
Pricing Agreement (APA) to file modified return
 In Advance Pricing Agreement (APA), there is already a facility for
the entity entering APA to file modified returns according to the
agreement. It is proposed to extend the same facility to the
associated entity of the person entering into agreement where it’s
income also changes on account of the agreement.
(xii) Amendments in the nature of clarifications
There are certain legal issues in which there are differing
judgement of courts. These relate to time-limit for assessment after
Dispute Resolution Panel proceedings, time-limit for Transfer Pricing
Officer order, Document Identification Number and issuance of notice for
re-assessment by the Jurisdictional Assessing Officer. In this regard, it is
proposed to clarify these issues in the Income-tax Act, 1961 and Income-
tax Act, 2025 to provide certainty to the provisions.
(xiii) Other minor modification in the Income-tax Act, 2025
 It is proposed to provide definition of “commodity derivative” in
section 66 of the Act.
 It is proposed to provide definition of “authorised person” in
section 402 of the Act.
 It is proposed to correct referencing error in Note 3 of section
393(1) [Table: Sl. No. 3(i)] from [Table: Sl. No. 3(iii)] to [Table: Sl.
No. 3(i)].
48
 It is proposed to correct referencing error in section 99(2) from
99(1)(a)(i) to section 99(1)(a)(ii).
 It is proposed to amend section 400(2) of the Income-tax Act,
2025 to align it with the intent of the provisions of Income-tax Act,
1961 and to provide that the guidelines issued by the Board under
this section shall apply to income-tax authorities as well as the
person liable to deduct or collect, as the case may be, income-tax.
 It is proposed to amend sections 58, 162, 164, 165, 202 and 270
of the Income-tax Act, 2025 to remove duplicate reference to
both the section 144 and Chapter VIII, as chapter VIII already
includes section 144.
 It is proposed to amend schedule VI [Note 1(g)] to align the
definition of the specified fund as provided in Schedule VI [Note
1(g)] of the Income-tax Act, 2025 with the provisions of section
10(4D) of the Income-tax Act, 1961.
 It is proposed to amend section 352(4) [Table: Sl. No. 8] to align
the provisions relating to accreted income in the case of merger
of registered NPOs with any other entity other than a registered
non-profit organisation (NPO) or with any other registered NPO
having the same or similar objects but the said merger does not
fulfil such conditions as may be prescribed or with a registered
NPO that does not have same or similar objects.
 It is proposed to insert a new section on the lines of section 12AC
of the Income-tax Act, 1961 to allow the merger of the registered
NPO with any other registered NPO having the same or similar
objects if the said merger fulfils such conditions, as may be
prescribed.
 It is proposed to amend section 351 of the Income-tax Act, 2025
to remove the reference of section 346 of the Income-tax Act,
49
2025 in said section to align the provision with the Income-tax Act,
1961
 It is proposed to amend section 332(1)(f) of the Income-tax Act,
2025 to remove the reference of Schedule VII [Table: Sl. No. 10 to
16] in said section so that such funds may not be required to
register themselves as the registered NPO.
 It is proposed to amend section 349 to enable the filing of belated
return by the registered NPO.
 It is proposed to change the annual value of property or part
thereof to be treated as nil from “for two years” to “upto two
years”.
 It is proposed to amend section 22(2) of the Income-tax Act, 2025
so as to provide that aggregate amount of deduction for interest
on borrowed capital shall be inclusive of prior-period interest
payable.
 It is proposed to amend section 262(10)(c) to enable Central
Board of Direct Taxes (CBDT) to make rules for quoting of
Permanent Account Number in such documents which does not
relate to business or profession.
50
Annexure to Part B
Amendments relating to Indirect Taxes
A. LEGISLATIVE CHANGES IN CUSTOMS LAWS
A.1 Amendments in the Customs Act, 1962
(i) Sub-section (2) of section 1 of the Customs Act, 1962 is
being amended to extend the jurisdiction of the said Act
beyond the territorial waters of India, for the purpose of
fishing and fishing related activities.
(ii) In section 2, a new clause is being inserted to define the
expression ‘Indian-flagged fishing vessel’.
(iii) Sub-section (6) of section 28 is being amended so as to
provide that the penalty paid under sub-section (5) of
section 28, on determination under sub-section (6)
thereof, shall be deemed to be a charge for non-payment
of duty.
(iv) Sub-section (2) of section 28J is being amended so as to
provide that advance ruling under sub-section (1) of that
section shall remain valid for a period of five years or till
there is a change in law or facts on the basis of which the
advance ruling has been pronounced, whichever is
earlier.
(v) The proviso to the said sub-section is also being
substituted so as to provide that in respect of any
advance ruling in force on the date on which the Finance
Bill, 2026 receives the assent of the President, the
Authority shall, upon a request by the applicant, extend
the validity of the ruling for five years from the date of
the ruling.
(vi) A new section 56A is being inserted to provide special
provisions for fishing and fishing related activities by an
Indian-flagged fishing vessel beyond territorial waters of
India. It also provides that fish harvested beyond the
territorial waters of India may be brought into India free
of duty and to treat fish that has landed at foreign port
as export of goods in such manner as may be provided by
A.2 51
rules. It also provides to make regulations to provide for
the form and manner of making an entry in respect of
fish harvested by an Indian-flagged fishing vessel
including its declaration, custody, examination,
assessment of duty, clearance, transit or transhipment.
(vii) In the Customs Act, for section 67, the following section
shall be substituted, namely: -
“67. The owner of any warehoused goods may remove
them from one warehouse to another, subject to such
conditions as may be prescribed.”.
The proposed section seeks to do away with the
requirement of prior permission of the proper officer
under the said section for removal of warehoused goods
from one custom bonded warehouse to another.
(viii) In section 84 of the Customs Act, in clause (b), for the
words “the examination”, the words “the custody,
examination” shall be substituted. The amendment
seeks to enable the Board to make provisions for the
custody of goods imported or to be exported under the
regulations framed under this section.
These changes shall come into effect from date of assent
to the Finance Bill, 2026.
Amendments in the Customs Tariff Act, 1975
(i) The First Schedule to the Customs Tariff Act, 1975 is
being amended to, add 148 new tariff entries in chapter
03, 08, 12, 13, 20, 21, 22, 25,26, 28, 29, 33, 39, 41, 47, 48,
73, 81, 84, 85, 86, substitute/delete 54 tariff entries and
amend 2 tariff entries in chapter 29 and 1 tariff entry in
chapter 85.
(ii) Further the tariff rate on certain tariff items is being
modified with effect from 02.02.2026 and the rates on
certain other tariff items are also being modified as part
of rate rationalisation with effect 01.04.2026.
(iii) In respect of various goods, to operationalize effective
basic customs duty rates from First Schedule instead of
exemption notifications, new tariff lines have been
created and the rate of duty for certain existing tariff
52
A.3 lines has been amended. This is a simplification exercise
and there is no change in the applicable rate of duties on
such goods.
(iv) New tariff lines are also being introduced to help in
better identification of the coated pipes for exports,
getting actual transaction data of precursor chemicals
and help in their effective monitoring, facilitating,
tracking exports and deciding policy measures for Plant
based extract products, and providing boost to eco-
friendly industries
(v) For details of the above, the Explanatory Memorandum
to the Finance Bill, 2026, may be referred. These changes
will come into effect from 01.05.2026, unless otherwise
specified.
Amendment to Rules and Regulations under Customs Act, 1962
(i) In addition to the above, new Baggage Rules are being
issued for international passengers.
(ii) Deferred duty payment is being made monthly and a
new class of eligible importers is being created by
amending the existing Deferred Payment of Import Duty
Rules, 2016.
(iii) Cap on the value of goods exported through courier is
being removed by amending Courier Regulations.
(iv) Further, to ease e-commerce, the returns and rejects
procedures in courier is being relaxed.
(v) To decongest the courier terminals and to improve the
overall efficiencies and ease of import and export, the
Courier Regulations are being amended to allow for
return to origin.
B. LEGISLATIVE CHANGES IN GST LAWS
[Save as otherwise provided, these changes will be brought into effect
from a date to be notified in coordination with States, as per
recommendations of the GST council]
B.1 Amendments in provisions related to post-sale discounts under
section 15 of the CGST Act, 2017
Sub-section (3) of section 15 of the Central Goods and Services
Tax Act, 2017 is being amended to do away with the
53
B.2 B.3 B.4 B.5 B.6 requirement of linking the post-sale discount with an agreement
and to refer to issuance of credit note under section 34 where
the input tax credit is to be reversed by the recipient.
Amendments in Section 34 of the CGST Act, 2017
Section 34 of the Central Goods and Services Tax Act, 2017 is
being amended so as to include the reference of section 15 in
the said section.
Amendments in Section 54 of the CGST Act, 2017 to provide for
provisional refunds on account of inverted duty structure
Sub-section (6) of Section 54 of the Central Goods and Services
Tax Act, 2017 is being amended to extend the provisions of
provisional refund to refunds arising out of inverted duty
structure.
Amendments in Section 54 of the CGST Act, 2017 to provide for
refund of tax below Rs. 1000/-
Sub-section (14) of Section 54 of the Central Goods and Services
Tax Act, 2017 is being amended to remove the threshold limit
for sanction of refund claims in case of goods exported out of
India with payment of tax.
Amendments in Section 101A of the CGST Act, 2017
Sub-section (1A) is being inserted in Section 101A of the Central
Goods and Services Tax Act, 2017 to provide that the Central
Government may, pending the constitution of the National
Appellate Authority, by notification empower an existing
Tribunal for hearing appeals under section 101B of the CGST Act,
2017; and to provide that the provisions of sub-sections (2) to
(13) shall not be applicable where a Tribunal has been so
empowered under sub-section (1A). This change shall come into
effect from the 1st day of April, 2026.
Amendments in Section 13 of the IGST Act, 2017 to provide for
place of supply for intermediary services
Clause (b) of sub-section (8) of section 13 of the Integrated
Goods and Services Tax Act, 2017 is being omitted so as to
provide that the place of supply for "intermediary services" will
54
be determined as per the default provision under section 13(2)
of the IGST Act.
C. CUSTOMS DUTY RATE CHANGES
C.1 To reduce input costs, boost domestic manufacturing and
promote export competitiveness, customs duty on the following
items are being reduced [with effect from 02.02.2026, unless
otherwise specified]
S. No. Commodity Rate of Basic Customs
Duty
From
(per cent)
To
(per cent)
I Critical Minerals
1. Monazite 2.5% Nil
II. Renewable Energy
2. Sodium antimonate for use in
manufacture of solar glass
7.5% Nil
3. Specified capital goods for use
in manufacture of lithium-ion
cells for batteries of Battery
Energy Storage System
As
applicable
Nil
III. Nuclear Energy
4. All goods for generation of
nuclear power falling under
tariff item 8401 30 00
7.5% Nil
5. Control and Protector
Absorber Rods, Burnable
Absorber Rods for generation
of nuclear power falling under
tariff item 8401 40 00
7.5% Nil
6. Goods required for the setting
up of specified Nuclear Power
Projects, irrespective of their
capacity, where the projects
have been registered with the
Customs Houses concerned on
or before 30th September 2035
As
applicable
Nil
S. No. IV. 7. V. 8. VI. 9. VII. 10. 11. 55
Commodity in compliance with the Project
Import Regulations, 1986
Electronics
Specified goods for use in the
manufacture of Microwave
Ovens falling under tariff item
8516 50 00
Civil Aviation
Components or parts including
engines, of aircraft, for
manufacture of aircraft and
parts of the aircraft
Defence Sector
Raw materials for manufacture
of parts of aircraft for
maintenance, repair, or
overhauling of aircraft or
components or parts of aircraft,
including engines, when
imported by Public Sector Units
under the Ministry of Defence
Drugs/ Medicines
17 new drugs/medicines to be
added in List 3 appended to
TABLE I of notification No.
45/2025-Customs dated
24.10.2025
7 rare diseases that are part of
National Policy for Rare Disease
(NPRD), 2021 to be added in List
22 appended to TABLE I of
notification No. 45/2025-
Customs dated 24.10.2025 for
customs duty exemption on
Rate of Basic Customs
Duty
From
(per cent)
To
(per cent)
As
applicable
Nil
As
applicable
Nil
As
applicable
Nil
5%/10% Nil
As
applicable
Nil
56
S. No. Commodity Rate of Basic Customs
Duty
From
(per cent)
To
(per cent)
drugs, medicines and food for
special medical purposes, when
imported for personal use
VIII. Personal Imports (with effect from 01.04.2026)
12. All dutiable goods, imported for
personal use under Chapter
heading 9804
10%/20% 10%
Note: Description of entries is indicative. Notification/Tariff may be
referred for complete description.
C.2 02.02.2026]
Increase/Modification in Customs duty [with effect from
S.
No.
Commodity Rate of Basic Customs
Duty
From
(per cent)
To
(per cent)
I. Chemicals
1. Potassium hydroxide Nil 7.5%
II. Umbrella and its parts
2. Umbrellas (other than garden
umbrellas) covered under tariff
items 6601 9100 and 6601 9900
20% 20% or Rs.
60 per piece,
whichever is
higher
3. Parts, trimmings and accessories
of articles of heading 6601 to
6602
10% 10% or Rs.
25 per kg.,
whichever is
higher
Note: Description of entries is indicative. Notification/Tariff may be
referred for complete description.
57
C.3 Review of exemptions
A review of the existing customs notifications providing concessional BCD
rates to various goods was undertaken. Consequently, upon review, the
following exemptions are being lapsed.
C.3.1 To lapse with effect from 02.02.2026
S. No.
S. No. of Table I
in 45/2025-
Customs
Description
1. 1 Animals and birds imported by Zoo
2. 113 Alpha pinene
3. 123 Artificial plasma
4. 128 Ammonium phosphate or ammonium
nitro-phosphate, for use as manure or for
the production of complex fertilisers
5. 132 Potassium sulphate, containing not more
than 52% by weight of potassium oxide*
6. 137 Other diagnostic or laboratory reagents
falling under tariff heading 3822 90 90*
7. 213 INVAR
8. 258 Coffee roasting, brewing or vending
machines for use in the manufacture or
processing of coffee
9. 285 Parts of radio trunking terminals
10. 287 CD-ROMs containing books of an
educational nature, journals, periodicals
(magazines) or newspapers
11. 310 Loco simulators
Note: Description of entries is indicative. Notification may be referred for
complete description.
*no change in the effective rate of duty on the goods
58
C.3.2 To lapse with effect from 01.04.2026
S. No.
S. No. of
notification No.
45/2025-
Customs
Description
In Table I of notification No. 45/2025-Customs
1. 93 Naphtha, for use in the manufacture of
fertilisers
2. 95 LPG, consumed in the manufacture of
polyisobutylene by DTA unit received from
SEZ unit and returned by DTA to SEZ from
where such LPG were received.
3. 107 Silicon for the manufacture of un-diffused
silicon wafers, and un-diffused silicon
wafers for the manufacture of solar cells or
solar cell modules**
4. 117 Maltol, for use in the manufacture of
deferiprone
5. 145 Specified goods in manufacture of Copper-
T contraceptives
6. 154 Ethylene – Propylene – Non-Conjugated
Diene Rubber (EPDM) for use in the
manufacture of insulated wires and cables
7. 172 Hydrophilic and hydrophobic non- woven
fabrics, imported for use in the
manufacture of adult diapers
8. 201 Spent catalyst or ash containing precious
metals
9. 218 Metal parts for use in the manufacture of
electrical insulators
S. No.
10. 11. 12. 13. 14. 15. 16. 17. 18. 19. S. No. of
notification No.
45/2025-
Customs
219 231 236 243 271 275 276 291 309 370 59
Description
Pipes and tubes for use in manufacture of
boilers
Permanent magnets for manufacture of
synchronous generators above 500KW for
use in wind operated electricity generators
Zeolite for use in the manufacture of wash
coat for catalytic converters
High speed cold-set or high speed heat set
web offset printing machines along with
mail room equipment
Cash dispenser or automatic banknote
dispenser and its parts and components
Television equipment, cameras and other
equipment for taking films, imported by a
foreign film unit or television team
Photographic, filming, sound recording of
foreign origin, if imported into India after
having been exported there from
Parts and components of digital still image
video cameras
Raw materials or parts for use in
manufacture of e-Readers
X-Ray tubes used in manufacture of X-ray
machines for medical, surgical or
veterinary use
60
S. No.
S. No. of
notification No.
45/2025-
Customs
Description
20. 372 Flat panel detector for use in manufacture
of X-Ray machine for medical, surgical or
veterinary use
21. 397 Parts of video games for the manufacture
of video games
In Table IV of notification No. 45/2025-Customs
22. 1 Motion pictures, music, gaming software
for use on gaming consoles printed or
recorded on media
In notification No. 113/2003-Customs dated 22 July 2003
23. Exemption to castor oil cake and castor de-oiled cake
manufactured from indigenous castor oil seeds on indigenous
plant and machinery by unit in SEZ and brought to DTA
Note: Description of entries is indicative. Notification may be referred for
complete description.
** no change in the effective rate of duty on the goods
D. Export Promotion Measures
D.1 Increase in value limit of duty-free import of specified goods for
use in processing of sea-food
The value limit of duty-free imports of specified goods imported for
use in processing of sea-food has been increased from 1% to 3% of
the FOB value of seafood products exported during the preceding
financial year.
D.2 Increase in time period of export for exporters of specified
goods manufactured from duty-free imported inputs
The time period of export of textile/leather garments,
leather/synthetic footwear or any other leather product by exporters
is being extended from six months to twelve months.
D.3 Extension of duty exemption on inputs for manufacture of
specified goods for export
The benefit of duty exemption on inputs for manufacture of
leather/synthetic footwear for export is being extended to exporters
of shoe-uppers also.
61
E. Central Excise Duty Changes
E.1 Exemption of Central Excise Duty on value of
Biogas/Compressed Biogas (CBG) contained in Blended Compressed
Natural Gas (CNG)
The value of Biogas/Compressed Biogas (CBG) and the appropriate
Central Tax, State Tax, Union Territory Tax or Integrated Tax, as the
case may be, paid on such Biogas or CBG contained in blended CNG, is
being excluded from the transaction value for the purpose of
computation of central excise duty on such blended CNG.
E.2 Amendment to Seventh Schedule to the Finance Act, 2001 to
revise the National Calamity Contingent Duty (NCCD) Rate with effect
from 01.05.2026 with no change in the effective duty rate***
S.No. Description NCCD Rate
From
(per cent)
To
(per cent)
1. Chewing tobacco 25% 60%
2. Jarda scented tobacco 25% 60%
3. Other 25% 60%
Note: Description of entries is indicative. Notification/Tariff may be
referred for complete description.
***effective duty rate will be maintained at 25% by notification
F. Others
There are a few other changes. For details of the budget proposals, the
Explanatory Memorandum and other relevant budget documents may be
referred to.