Budget 2026 Expectations LIVE: Will FM further ease income tax, boost MSMEs, step up railway spending?

Nikhil Agarwal, President, CJ Darcl Logistics, said that the Budget can play a catalytic role by introducing outcome-based incentives linked to measurable carbon emission reductions in logistics operations.

Encouraging adoption of alternate fuels and electric mobility, along with investments in charging and refuelling infrastructure, will enable fleet operators to transition sustainably without compromising economics, Agarwal added.

“A policy framework that rewards lower emissions, promotes multimodal transport, and strengthens human capital will position logistics as a key enabler of India’s competitive, resilient, and low-carbon growth,” Agarwal said

Dr R.G. Agarwal, Chairman Emeritus of Dhanuka Agritech, stated that pesticides are not luxury products but rather plant medicines and a form of crop insurance for farmers; yet, they attract a 18% GST, similar to luxury items.

“Just as the GST on essential human medicines was reduced, we urge the government to bring the GST on pesticides down to 5%, so farmers are not overburdened.”

Agarwal added, “At the same time, we recognise that several promises from the last Budget have moved from announcement to action. Other initiatives are underway, and the intent is positive. The key focus now should be execution and real impact at the farm level.”

According to IndiaMART, Intermesh, COO, Dinesh Gulati, this year’s budget will provide some simplifications in the GST structure and easing the the Input Tax credit structure. He expects this simplifications would contribute massively towards the overall growth of the economy.

He further expects strong policy support in the MSME sector with the utilization of AI, robotics and data analytics at a rapid pace.

Also due to geopolitical uncertainties, it is expected that temporary interest subvention scheme would be offered for specific export-oriented industries, Gulati added.

Commenting on pre-budget expectations. Bhaktha Keshavachar, Co-Founder & CEO, Chara Technologies said in a note that India’s EV sector is likely to see a growth following curbs on imported rare-earth mentals, which are an important component in EVs.

“As we look towards Budget 2026, there is a timely opportunity to strengthen India’s EV manufacturing base by formally recognising and supporting magnet-free motor technologies within existing fiscal frameworks. These technologies offer predictable costs, supply chain stability, and the creation of indigenous intellectual property, especially for high-volume segments such as two-wheelers, three-wheelers, and commercial fleets,” he said in a note.

Sneha Padhiar, Partner at Bhuta Shah & Co LLP said that the key expectations is ‘the rationalization of personal income tax slabs and rates to create a more equitable system’.

“This move is coupled with a call to address the misuse of the old tax regime, specifically targeting the curbing of bogus refund claims to enhance overall tax compliance across the nation,” she added.

With the New Income Tax Act, 2025 set to take effect, Padhiar highlighted the critical need for a smooth transition plan and extensive stakeholder consultation to ensure clarity, simplification, and consistency in legal interpretation.

Gaurav Garg, Research Analyst at Lemonn Markets Desks expects this year’s budget to focus on defence, green energy, urban infrastructure . He further added that sectors like health, education, and traditional infrastructure will only get incremental increases.

“Overall, Budget 2026 will emphasise disciplined spending, targeted capital allocation, and private-sector crowding,” Garg said in a note.

The analyst also noted that budget would be focused more towards ‘strategic prioritisation’ rather than big announcements.

EY in a note said that the Indirect Tax landscape will witness some key reforms in the forthcoming budget. This will further ease the doing of business in India, it added.

EY expects the Union Budget 2026 to include

1. Dispute Resolution Scheme: A one-time settlement scheme under Customs Law which would facilitate the resolution of pending disputes.

2. Extension of Customs Advance Rulings Validity:  It expects the validity the advance ruling to be extended to five years from the current three years. As per EY, this extensions will help improve tax certainty and provide businesses with a clearer framework for compliance, reducing the risk of disputes.

3. Simplification of Customs Tariff Structure:  It expects the current custom tariff structure to simplify, which would help reduce compliance burden on importers. This includes sector-wise customs duty rationalization and aligning tariff rates with global standards ensuring Indian goods remain competitive in international markets.

FICCI has urged the government to provide tax neutrality for fast-track demergers, saying the move would encourage restructuring among small companies and intra-group entities while reducing the burden on the National Company Law Tribunal (NCLT).

Under the Income-tax Act, 1961, a demerger is defined by linking it to court-approved schemes under the Companies Act. While the Income-tax Act, 2025 updates this reference to Sections 230–232 of the Companies Act, 2013, it does not include Section 233, which governs fast-track mergers and demergers.

Section 233 introduced a fast-track route for certain classes of companies, allowing mergers and demergers without NCLT approval. Under this mechanism, schemes are approved by the Central Government after inviting objections from government departments and ensuring there is no prejudice to public interest or creditors. If the Central Government is not satisfied, the scheme is referred to the NCLT for approval under the conventional process outlined in Section 232.

FICCI has urged the government to simplify tax deduction at source (TDS) provisions, saying the current structure places a heavy compliance burden on taxpayers and often leads to avoidable litigation.

Currently, there are 37 different types of payments to residents where the TDS rates vary from 0.1% to 30%. This gives rise to unwarranted disputes related to categorisation and interpretation.

FICCI acknowledged that the government has taken a positive step by reducing TDS rates on several payments from 5% to 2% through the Finance (No. 2) Act, 2024, but said further rationalisation is needed.

“Going forward, it is suggested that there be only three rate structures for TDS payments – TDS on salary at slab rate, TDS on lotteries/online games etc at maximum marginal rate and two standard rates for TDS for different categories.”

FICCI also proposed exempting business-to-business payments that are subject to GST from TDS, arguing that transaction data is already available through Form 26AS and the Annual Information Statement. It said TDS and TCS on purchase and sale of goods at 0.1% do not generate meaningful revenue but significantly increase compliance costs.

FICCI also recommended that revenue-neutral standard rates be determined by the tax department using data analytics.

It also called for the introduction of a “negative list” of payments not liable to TDS, including payments to senior citizens, payments involving exempt income such as those made to farmers, payments to banks and financial institutions, and purchases from GST-registered entities where GST has been paid.

Industry body Assocham has recommended changes to the income tax assessment framework to allow taxpayers to make fresh claims during assessment proceedings.

ASSOCHAM said taxpayers should be allowed to raise additional claims or withdraw claims already made in their return while assessments are underway. Such withdrawals, it suggested, should come with immunity from penalty, provided the taxpayer pays the due tax and interest and does not file an appeal on the withdrawn claim.

“Currently, taxpayers are not permitted to make fresh claims during assessment, though the same is allowed at the appellate stage. This creates an anomaly in the tax administration framework,” the industry body noted.

The Ministry of Railways on Monday, January 5, said it has made strong progress in utilising its Gross Budgetary Support (GBS) for FY 2025–26. As of end-December 2025, the ministry had spent 80.54%, or Rs. 2,03,138 crore, of its total GBS allocation of Rs. 2,52,200 crore, reflecting a 6.54 percentage point increase compared to the same period last year.

The expenditure has largely been directed towards safety initiatives, capacity expansion, infrastructure modernisation, and improving passenger amenities. According to the ministry, the pace of spending indicates that infrastructure projects are being executed swiftly and that the GBS targets for FY 2025–26 are likely to be fully met.

Paresh Parekh, Partner and National Leader for Tax – Consumer Products and Retail Sector, EY India said that the budget is likely to support the manufacturing sector, which is crucial for the growth of the retail sector.

“The Budget may also aim to provide support to Micro, Small, and Medium Enterprises (MSMEs) to boost their retail activities. There is also a focus on promoting digital payments to enhance the ease of doing business in retail.” Parekh said.

“Targeted fiscal relief through lower personal taxes are expected to enhance disposable incomes and strengthen consumer sentiment, directly stimulating retail growth.” he added

The industry body PHDCCI suggested the reintroduction of an interest subvention scheme for MSMEs, with a 2 per cent interest subsidy on new and incremental loans from banks and NBFCs. It argued that lower borrowing costs are expected to improve repayment discipline and enhance competitiveness.

It also pitched for upward revision of MUDRA loan ceilings, from Rs 50,000 to Rs 1 lakh for the Shishu category and from up to Rs 5 lakh to up to Rs 10 lakh for the Kishore category.

The Ministry of Statistics & Programme Implementation on Wednesday released the First Advance Estimates of Gross Domestic Product (GDP) for FY26, pegging GDP growth at 7.4%. Nominal GDP is estimated to grow at 8.0%.

Real Gross Value Added (GVA) is projected to rise 7.3% in FY26, with the services sector emerging as the key growth engine.

The First Advance Estimates of GDP were keenly awaited as they serve as the base for Budget 2026 calculations.

The Second Advance Estimates will be released on February 27.

READ MORE: India’s GDP set to jump to 7.4% in FY26, nominal growth seen at 8%: Govt estimates

In the previous Budget, government stays firmly on the fiscal consolidation path, pegging the FY26 fiscal deficit at 4.4% of GDP. According to a report by ICRA, India’s fiscal deficit hit approximately 62% of the full-year budget estimate as of April–November 2025, indicating that over 3/5ths of the annual gap has already been used up in the first eight months.

READ MORE: Budget 2026 Preview: India hits 62% of fiscal deficit target by November—Can Sitharaman meet the 4.4% target?

ASSOCHAM lists policy recommendations to accelerate fiscal consolidation while supporting growth.

* Prioritise high-quality capital expenditure in logistics, transport, transmission, renewable energy and industrial corridors to sustain productivity-driven growth.

*Strengthen asset monetisation by instituting a single-point approval mechanism, ensuring regulatory predictability and providing clear fair-value disclosures to attract long-term private investors.

*Expand State participation in national infrastructure and monetisation pipelines through incentives, technical support and harmonised approval systems to improve fiscal efficiency at all levels of government.

*Improve fiscal predictability for exporters and MSMEs by ensuring timely GST and RoDTEP refunds, enforcing payment timelines for government entities, and setting up a tariff-impact relief mechanism for vulnerable sectors.

*Accelerate dispute resolution in infrastructure and PPP projects through a standing Vivad-se Vishwas–type mechanism to reduce contingent liabilities and unlock stalled fiscal assets.

*Promote integrated infrastructure planning through stricter time-bound state and central clearances under PM Gati Shakti to ensure better utilisation of public funds and avoid cost overruns

ASSOCHAM has recommended easing investment to enhance capital inflow. The industry body recommended encouraging stable FDI flows by modernising FOCC norms and easing downstream investment rules.

ASSOCHAM further advocated for improved liquidity stability through diversified funding for NBFCs and lower regulatory bottlenecks for small-ticket MSME lending. “Deepen corporate bond markets through expanded repo access, DVP-III settlements, and wider participation from insurers/pension funds”, ASSOCHAM suggested

CPI inflation in October fell to 0.25%, the lowest year-on-year CPI inflation in the current series. This marked a sharp easing from the 3.61% (YoY) recorded in the Budget month of February 2025. In November, CPI inflation increased by 46 basis points to 0.71%.

The December CPI data is yet to be released.

Read more: Budget 2026 preview: The sharp slide in inflation, RBI target and big expectation ahead of Budget

The new Income Tax Act, 2025 is scheduled to come into force from 1 April 2026. Dinesh Kanabar, Chairman & CEO, Dhruva Advisors India believes the Budget should focus on improving tax administration and dispute resolution rather than announcing any change in income tax laws, “This Budget would carry no substantive proposals on direct taxes, particularly amendments to a law that has not yet come into effect. Any tinkering with the framework at this stage would undermine the very purpose of introducing a clean-slate legislation.”

He added that India’s tax challenges do not lie in the architecture of the law, but in its administration and implementation. “Despite several progressive reforms over the last few years—faceless assessments, electronic interfaces, reduced physical interaction, and digitised processes—tax disputes continue to proliferate, and concerns around tax administration remain unabated,” he noted.

Balfour Manuel, Managing Director at Blue Dart, noted that Budget 2026 has the potential to be a defining inflection point in accelerating India’s logistics transformation under the PM Gati Shakti vision.

“For the express logistics sector, sustained investments in airport infrastructure, cargo-handling capacity and regional air connectivity will be critical to improving turnaround times and supporting high-value, time-sensitive shipments. In parallel, wider adoption of digital enablers such as unified logistics platforms, data-driven visibility and paperless processes can further enhance predictability, transparency and ease of doing business for exporters and MSMEs alike,” Manuel said.

“As sustainability becomes central to long-term competitiveness, policy levers can play a catalytic role. Differential taxation that favours greener modes of transport could accelerate modal shifts more effectively than standalone subsidies. Alongside this, focused investments in EV charging and alternative fuel infrastructure would help address practical adoption challenges, particularly across long-haul movements and urban delivery operations, enabling decarbonisation while maintaining service reliability,” he added.

He also highlighted that continued capital expenditure on road infrastructure, especially last-mile connectivity, would further extend reliable logistics services into Tier 2, Tier 3 and rural India, strengthening MSME participation, integrating them into national and global supply chains, and supporting inclusive growth.

“The Union Budget 2026–27 must focus on three structural priorities- liquidity support, recovery mechanisms and tax relief,” said Ravi Narayanan, MD & CEO of SMFG India Credit, highlighting that NBFCs will be critical to sustaining credit flow to MSMEs and self-employed segments.

He also recommended a dedicated refinance window for NBFCs, similar to the National Housing Bank (NHB), and expanded credit guarantee coverage for MSMEs.

Narayanan said micro borrowers can significantly lower funding costs and improve credit availability for smaller enterprises. Aligning the SARFAESI Act threshold for NBFCs with banks and housing finance companies (HFCs) by reducing it from Rs 20 lakh to Rs 1 lakh would strengthen recovery efficiency and help contain asset quality risks. Similarly, removing the 10% TDS on NBFC interest income would ease cash-flow constraints and free up capital for lending.

Industry body Assocham recommends the reintroduction of a reduced corporate tax regime similar to Section 115BAB to boost India’s manufacturing and service sectors. “To give boost to the manufacture and service sector such as companies engaged in logistics, renewables, healthcare, a reduced tax rate similar to section 115BAB should be introduced for new companies. The benefit should also be extended to new investments or expansion made by the existing companies. If required, conditions may be prescribed for the additional investment/ employment generation, etc. for entitlement of the regime.”

In the Union Budget 2025, the finance ministry announced relief to the middle class by making income up to Rs 12 lakh tax-free under the new tax regime.

For salaried taxpayers, the effective tax-free threshold rises to Rs 12.75 lakh, after accounting for the standard deduction of Rs 75,000.

“To tax payers upto 12 lakh of normal income (other than special rate income such as capital gains) tax rebate is being provided in addition to the 159. benefit due to slab rate reduction in such a manner that there is no tax payable by them,” Sitharaman said in her speech.

Railways Ministry on Monday, January 5, said it has made strong progress in utilising its Gross Budgetary Support(GBS) for FY2025-26.

As of end-December 2025, it has spent 80.54%, or Rs 2,03,138 crore, of its total GBS outlay of Rs 2,52,200 crore, marking a 6.54% improvement over the same period last year. The expenditure has primarily focused on safety measures, capacity enhancement, infrastructure modernization, and passenger amenities.

“These trends indicate that the Ministry of Railways’ GBS expenditure plan is on track, with infrastructural works being executed expeditiously. They also suggest that the targets for FY 2025-26 are likely to be fully achieved.” Railway Ministry said in its release./

Finance Minister Nirmala Sitharaman will present the Budget in Parliament. This will be her ninth Budget since assuming office in 2019. In 2021, she introduced the paperless format, using a tablet encased in a red cover adorned with the golden national emblem.

The annual Union Budget for the year 2026 is Scheduled to be presented on February 1. While There are a confusion if the dates will be changed as it is falling on Sundays. However, this year it falls on a Sunday, and there has been no official announcement yet regarding a change of date.

Since 2017, the Union Budget has been held on February 1.