Union Budget 2026 to Break Traditional Mold: Government Sources Confirm Unprecedented Focus on Long-Term Tax Reforms in Part B

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Finance Minister Nirmala Sitharaman is poised to present a distinctive Union Budget 2026-27 on February 1, with government sources indicating an unprecedented emphasis on Part B of the budget speech, which deals with taxation proposals and long-term structural reforms rather than immediate fiscal relief.

Strategic Shift in Budget Approach

The Revenue Secretary's team is responsible for Part B of the Budget Speech, which handles direct taxes like income tax and corporate tax, as well as indirect taxes including GST and customs. Unlike previous budgets that focused heavily on populist measures and short-term tax relief, Budget 2026 is expected to prioritize economic stability and structural certainty over incremental concessions.

This represents a shift in policy narrative beyond incremental relief measures towards long-term certainty, competitiveness and structural clarity, particularly significant as it coincides with the transition to the new Income-tax Act, 2025, which replaces the six-decade-old Income-tax Act, 1961 from April 1, 2026.

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Economic Context and Global Challenges

The budget arrives at a critical juncture for India's economy. The upcoming budget is expected to prioritize tax relief, infrastructure expansion, and overall economic growth, even as India navigates global tariff disputes and regional diplomatic challenges. With robust first-half GDP growth of 8% and projections of 7.2-7.3% for the full fiscal year, the government faces the delicate task of maintaining momentum while ensuring fiscal discipline.

Market analysts suggest that rather than announcing sweeping tax cuts or slab expansions, Budget 2026 is widely expected to avoid piecemeal legislative tinkering and instead signal a more principled and cohesive approach to tax policy and administration.

Focus Areas and Expectations

The budget is anticipated to address several critical long-term objectives aligned with the Viksit Bharat@2047 vision. Key areas of focus include strengthening manufacturing competitiveness, accelerating infrastructure development, and enhancing India's position as a global investment destination.

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Experts indicate the budget will emphasize administrative reforms and compliance simplification rather than dramatic legislative changes. This includes streamlining foreign asset disclosure requirements, providing clearer guidance on overseas asset reporting, and establishing safeguards against penalties for unintentional compliance errors.

The capital expenditure outlook remains robust, with government spending patterns showing 32.4% growth in capital expenditure during April-October FY26, demonstrating continued commitment to infrastructure creation and long-term asset building.

Historic Milestone

This budget marks a historic milestone as Sitharaman presents her ninth consecutive budget, bringing her within reach of former Prime Minister Morarji Desai's record of ten budgets. The presentation comes amid ongoing India-European Union Free Trade Agreement negotiations and uncertain global economic conditions.

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Industry stakeholders are seeking policy predictability and consistency rather than headline-driven announcements. The emphasis on Part B suggests a maturation of India's fiscal approach, prioritizing sustainable growth frameworks over short-term electoral considerations.

As markets await the budget presentation, the expectation is clear: Budget 2026 will set the tone for India's economic trajectory through long-term structural reforms rather than immediate populist measures.