14

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
 15

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
 16

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.
 17

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
 18

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
 19

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.
 20

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.
 21

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. I propose to extend time available for revising returns from
31st December to up to 31st March with the payment of a nominal
fee.
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. This scheme would be applicable for two categories of
taxpayers namely,
(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.
 22

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.
 23

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.
 24

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.
 25

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.
 26

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.