The Budget has been presented at a pivotal juncture, coinciding with the replacement of the Income Tax Act, 1961 by the newly introduced Income-tax Act, 2025, effective from 1st April 2026.
The global economy has faced multiple upheavals, the most disruptive of which has been the imposition of tariffs by the United States on imports from its trade partners due to this Global growth remains fragile but stable despite recent shocks. In contrast, India enters FY 2026–27 with strong macroeconomic fundamentals, remaining the fastest-growing major economy with GDP growth projected at 7.4% (FY26). Further, the Economic Survey has estimated the real GDP growth for FY26 at over 7% for full year and projects real GDP growth in FY27 in the range of 6.8 to 7.2 per cent. On the fiscal front, credible deficit reduction continues, with the fiscal deficit budgeted at 4.4% of GDP in FY26.
Budget 2026’s direct tax proposals continue the Government’s reform-centric approach, with a clear focus on simplification, certainty, and reduction of tax litigation rather than immediate rate-based relief. The most significant structural change is the proposal to introduce a new Income-tax Act, 2025 with effect from 1 April 2026 which introduced the concept of ‘tax year’ which is equivalent to the fiscal year commencing from 1st April, 2026 onwards. It further provides a significant reassurance to taxpayers by not proposing the re-introduction of wealth tax or estate duty on inheritance, signalling government’s commitment to tax certainty and capital formation.
The Government’s approach to indirect taxes, particularly Customs, focuses on simplifying the tariff structure, supporting domestic manufacturing, enhancing export competitiveness, and correcting duty inversions.
In nutshell, the Union Budget 2026’s proposals prioritise long-term structural reform over short-term tax relief. While immediate gains for individual taxpayers are limited, the focus on simplification, improved compliance, and reduced litigation and trust-based administration strengthens the foundation of India’s tax framework.
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