Key Insights

• Deficit Reduction: Fiscal deficit fixed at 4.3% to sustain steady fiscal consolidation.
• Record Capex: ₹12.2 lakh crore allocated for infrastructure, covering seven high-speed rail routes and new national waterways.
• Tax Facilitation: Move towards automated, tech-driven, and trust-led systems to ease compliance burden.
• Strategic Manufacturing: Schemes such as the ₹100 billion Biopharma SHAKTI support India’s global manufacturing ambitions.
• Export Simplification: Removal of the ₹1 million cap on courier exports supports MSMEs and e-commerce exporters.

Assessing the Direct Impact of Fiscal Policies on Indian Businesses

• More Facilitative Compliance Environment

For businesses, the Budget signals lower compliance costs through simplified income-tax procedures, streamlined customs processes, and faster dispute resolution. The proposed new Income-tax Act introduces extended timelines for return revision, rationalised penalties, and further decriminalisation of minor procedural offenses.

• Manufacturing and Supply-Side Strengthening

The emphasis on strategic manufacturing reflects a supply-side approach aimed at boosting domestic capacity, reducing import dependence, and attracting long-term investment in priority sectors.

• MSME Support and Liquidity

MSMEs benefit from a combination of regulatory easing and financial support, including:

1. A dedicated SME Growth Fund of ₹10,000 crore to provide equity support and job creation.
2. Streamlined TDS and TCS provisions.
3. Mandatory onboarding of CPSE purchases onto the TReDS platform, improving invoice discounting and cash-flow certainty.

• Global Integration and Tax Certainty

To enhance cross-border confidence, the Budget proposes:

1. A unified safe harbour margin of 15.5% for an integrated “Information Technology Services” category.
2. Administrative measures to expedite Advance Pricing Agreements (APAs), improving predictability for multinational operations.

Key Budget Factors from a Business Perspective

Businesses recalibrating their strategies should factor in the following macro-economic and fiscal signals:

• Growth Outlook: Independent estimates place FY27 GDP growth in the range of 6.8%–7.2%, reflecting steady expansion amid global uncertainty.
• Fiscal Deficit: Targeted at 4.3% of GDP, reinforcing fiscal credibility.
• Infrastructure Spending: Capital expenditure raised to ₹12.2 lakh crore, sustaining investment momentum.
• Monetary-Fiscal Alignment: While independent of the Budget, prior RBI rate reductions complement the government’s fiscal stance.
• External Stability: Foreign exchange reserves of approximately $709 billion provide comfortable import cover, supporting investor confidence.

Adapting to New Policy Realities

New Income-tax Framework

The proposed Income-tax law, effective from 1 April 2026, focuses on procedural simplification rather than rate changes, requiring businesses to align internal systems with revised compliance timelines.

Capital Market Changes

• Securities Transaction Tax (STT) on derivatives will increase from April 1, 2026, with rates set at 0.15% on options premium and 0.05% on futures.
• Share buybacks will now be taxed as capital gains in the hands of shareholders, replacing the earlier dividend-based taxation model.

Customs Duty Rationalisation

Twenty-two basic customs duty (BCD) exemptions across sectors such as electronics and medical devices are scheduled to lapse by March 31, 2026, encouraging domestic manufacturing.

Actionable Steps for Businesses

1. Prepare for the New Income-tax Act
   Update internal tax systems to accommodate extended return-revision timelines and revised penalty structures.
2. Reassess Capital Market Strategies
   Factor in higher STT costs and the capital-gains taxation of buybacks.
3. Leverage MSME-Focused Instruments
   Utilise the SME Growth Fund and expanded TReDS coverage to strengthen liquidity management.
4. Evaluate Safe Harbour Opportunities
   IT and digital services firms should align transfer pricing policies with the new 15.5% safe harbour margin, subject to eligibility conditions.

Union Budget 2025-26 Compared To Union Budget 2026–27

Economic Outlook and Long-Term Vision

The Union Budget 2026–27 marks a decisive move from discretionary oversight to rules-based, automated governance. By combining fiscal prudence with targeted industrial support and record infrastructure investment, the Budget lays the groundwork for sustained growth and aligns with the long-term vision of a developed and globally integrated Indian economy.

Conclusion

The Union Budget 2026–27 successfully balances fiscal discipline with growth-oriented reforms. While businesses must adapt to procedural changes under the new Income-tax framework and capital market reforms, the broader policy narrative emphasises stability, predictability, and simplified compliance. By leveraging infrastructure expansion and manufacturing incentives, Indian enterprises can position themselves for durable, long-term growth.

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