Union Budget 2026 highlights: Key announcements by FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Sunday presented the Union Budget 2026 in the Lok Sabha marking her ninth consecutive Budget and bringing her closer to the record of 10 Budgets presented by former Prime Minister Morarji DesaiIn her speech Sitharaman said the government is choosing the path of reforms over rhetoric and reaffirmed its commitment to steps aimed at making India a Viksit Bharat Here are the key highlights of Union Budget 2026Union Budget 2026 16th Finance Commission ReportFinance Minister Nirmala Sitharaman laid the 16th Finance Commission report while presenting Union Budget 2026The report outlines the formula for tax revenue devolution between the Centre and states for 2026ndash2031Cesses and surcharges levied by the Centre are excluded from the divisible poolGovernmentrsquos focus on Union Budget 2026Balancing fiscal consolidation with reformled growthStrengthening Centrestate financial coordinationContinuing steps toward sustainable developmentUnion Budget 2026 Finance Minister proposes rare earth corridors for mineralrich statesThe FM proposed rare earth corridors for mineralrich states including Odisha Kerala Andhra Pradesh and Tamil NaduThese corridors aim to promote mining processing research and manufacturing of rare earth elementsShe highlighted that the Scheme for Rare Earth Permanent Magnets was launched in November 2025The scheme has a financial outlay of Rs 7280 crore and plans to establish 6000 Metric Tons per Annum MTPA of integrated Rare Earth Permanent Magnet REPM manufacturing enhancing Indiarsquos selfreliance and global market positioningBiopharma Shakti Programme gets Rs 10000crore allocationFM Sitharaman announced the Biopharma Shakti programme to boost Indiarsquos biopharma sector with an allocation of Rs 10000 crore over five yearsThe initiative targets noncommunicable diseases like diabetes and aims to develop India as a global biopharma manufacturing hubThe programme will focus on building an ecosystem for biopharma and biosimilars fostering innovation and strategic growth in the sectorStrengthening regional economies industrial clustersThe Finance Minister proposed scaling up manufacturing in strategic and frontier sectorsEmphasis will be placed on developing city economic regions to strengthen regional economies and industrial clustersEconomic outlook and policy directionFM Sitharaman noted that Indiarsquos economic trajectory over the past 12 years has been marked by stability fiscal discipline sustained growth and moderate inflationShe stressed the governmentrsquos commitment to action over ambivalence reform over rhetoric and Atmanirbharta selfreliance as a guiding principleGoing forward India will focus on balancing ambition with inclusion fostering growth while ensuring equitable developmentMunicipal bondsFM Nirmala Sitharaman proposed incentives of Rs 100 crore for single bond issuance by municipal corporations with borrowings of more than Rs 1000 croreThe move aims to strengthen municipal financing and support urban infrastructure developmentPublic sector financial institutionsThe Finance Minister announced the restructuring of REC Ltd formerly Rural Electrification Corporation and Power Finance Corporation PFCThese steps are part of the governmentrsquos plan to strengthen public sector financial institutionsBanking for Viksit BharatSitharaman proposed the setting up of a highlevel committee on lsquoBanking for Viksit BharatrsquoShe highlighted that Indiarsquos banking sector has a strong balance sheet and is experiencing a historic high profitabilityForeign exchange managementThe Finance Minister proposed a review of foreign exchange management rules related to nondebt instrumentsThe move is aimed at streamlining regulations and improving the ease of investmentPoverty reductionSitharaman noted that close to 25 crore people have come out of multidimensional poverty under government initiatives This reflects progress in inclusive development and social welfare measures she statedSeven highspeed rail corridors as growth connectors between citiesMumbai to PunePune to HyderabadHyderabad to BengaluruHyderabad to ChennaiChennai to BengaluruDelhi to VaranasiVaranasi to SiliguriInvestment and capital market reformsIndividual Persons Resident Outside India PROIs will be allowed to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme PISTax on share buybacks will be treated as capital gains for all shareholders though promoters will pay an additional buyback taxExemption from Minimum Alternate Tax MAT granted to nonresidents paying tax on a presumptive basisMAT proposed to be made a final tax simplifying complianceSetoff of available MAT credit allowed up to onefourth of tax liability under the new tax regimeTax reliefsInterest awarded by Motor Accident Claims Tribunals to natural persons will be exempt from Income Tax with no TDS applicableTime limit for revising income tax returns extended from December 31 to March 31 on payment of a nominal feeIndividuals filing ITR1 and ITR2 can continue filing returns till July 31 while nonaudit business cases and trusts get time till August 31Taxpayers will be allowed to update returns even after reassessment proceedings with an additional 10 per cent tax over the applicable rateOnetime sixmonth foreign asset disclosure scheme proposed for small taxpayers with assets below a specified thresholdImmunity from prosecution with retrospective effect from October 1 2024 for nondisclosure of nonimmovable foreign assets valued below 20 lakhTDS and TCS rationalisationTax Collected at Source TCS on overseas tour packages reduced to 2 per cent down from 5 per cent and 20 per cent without any threshold conditionTCS for education and medical expenses under the Liberalised Remittance Scheme LRS reduced from 5 per cent to 2 per centTDS on supply of manpower services to be levied at either 1 per cent or 2 per centTDS on sale of immovable property by nonresidents to be deducted and deposited using the resident buyerrsquos PAN instead of TANRulebased automated system to enable small taxpayers to obtain lower or nil TDS certificatesDepositories to be permitted to accept Form 15G and 15H from taxpayers holding securities across multiple companiesCompliance and decriminalisation measuresNonproduction of books of account and delays in TDS payments decriminalisedFramework for immunity from penalty and prosecution extended from underreporting to cases of misreportingHonest taxpayers opting to settle disputes can close cases by paying an additional amount in lieu of penaltiesCustoms and trade facilitationBasic Customs Duty BCD is exempted on 17 drugs and medicines used in cancer treatmentSingle interconnected digital window to be introduced for cargo clearance approvalsCustoms Integrated System CIS to be rolled out over the next two years to streamline customs processesInstitutional and accounting reformsA Joint Committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes CBDT to be constituted to align Income Computation and Disclosure Standards ICDS with Indian Accounting Standards IndASEducation infrastructure pushFive University Townships to be developed near major industrial and logistics corridors aimed at strengthening industryndashacademia linkages and improving employabilityBoost for Girls in STEM EducationA girlsrsquo hostel to be set up in higher education STEM institutions in every district to support increased participation of women in science and technology fieldsScientific research and space infrastructureFour Telescope Infrastructure facilities to be set up or upgraded to strengthen Indiarsquos capabilities in astronomy and scientific research