India awaits a rare ‘Sunday Budget’: All eyes on Sitharaman’s red ‘bahi Khata’

Union Budget 2026: With less than a few hours to go, the countdown to the Union Budget 2026–27 has entered its final stretch. As anticipation builds across households, industry and financial markets, the country is gearing up for a financial statement that will mark several firsts in India’s budgetary history.To be presented on a “rare Sunday,” the Budget adds a historic twist to a tradition stretching back decades. The unusual timing has only heightened the sense of expectation as Finance Minister Nirmala Sitharaman prepares to step into the Lok Sabha for a milestone moment.The 2026 Budget will be Sitharaman’s ninth consecutive Union Budget, making her the first finance minister in India to achieve this feat. Expectations from the speech are high, with a strong focus on tax reforms, customs duty rationalisation, and measures to sustain growth at a time of rising geopolitical risks and global trade uncertainty.Beyond immediate policy announcements, the Sunday Budget is also seen as a potential turning point in fiscal strategy. The government is expected to outline a clear roadmap for lowering India’s debt-to-GDP ratio, signalling a shift from short-term deficit management to a more durable, long-term approach to fiscal consolidation.

Income tax relief tops taxpayers’ wishlist

After major relief in Budget 2025 — including the income tax exemption limit being raised to Rs 12 lakh and GST rationalisation — individual taxpayers are hoping for further easing, especially through a higher standard deduction.With the new Income Tax Act, 2025, coming into force from April 1, industry bodies are seeking clarity on transition provisions, rules and FAQs to ensure smoother implementation, PTI reported.There is also an expectation that the government may offer additional incentives to encourage taxpayers to shift to the new tax regime, which offers lower rates but fewer exemptions. Rationalisation of TDS categories into fewer slabs is another key demand.Income tax slabs fy27: what taxpayers wantUnder the new tax regime, income tax slabs currently stand as follows: Income up to Rs 4 lakh: Exempt

Salaried taxpayers want the 30% tax slab threshold raised to Rs 30 lakh. At present, income up to Rs 12 lakh (Rs 12.75 lakh for salaried taxpayers) is tax-free after the Section 87A rebate. Tax experts suggest this threshold could be raised to Rs 15 lakh.Many taxpayers who still use the old tax regime are also seeking lower rates and a higher basic exemption limit.

Section 80C

Section 80C, one of the most-used exemptions under the old tax regime, continues to have a Rs 1.5 lakh cap, unchanged for years. Experts argue that the limit should be increased and extended to the new tax regime to encourage long-term savings and accelerate adoption.

Customs reform and ease of doing business

Customs duty reform is expected to be a major Budget theme, with a possible overhaul similar to GST rationalisation. This could include:

Such measures are seen as critical for improving ease of doing business and trade competitiveness.

Why the budget matters to households

For households, Budget decisions have an immediate impact through changes in income tax, subsidies and welfare spending. The relief announced in Budget 2025 boosted disposable income for middle-class families, supporting consumption at a time of financial stress.Higher disposable income typically lifts demand for retail, automobiles, housing and FMCG, while policy support for housing strengthens construction and allied industries — highlighting how tax decisions ripple through the wider economy.

Dalal Street’s lens

For investors, the February 1 Budget will signal the government’s stance on growth, fiscal discipline and corporate earnings. In FY26, despite tax relief, the government maintained fiscal discipline with a fiscal deficit target of 4.4% of GDP, down from 4.8% earlier.Market volatility during the special Budget trading session underlined how sensitively investors react to fiscal cues, with benchmark indices swinging sharply before ending nearly flat.

Fiscal consolidation and debt strategy

Economists expect the Budget to spell out steps to reduce the debt-to-GDP ratio from FY27, alongside higher defence spending amid rising global tensions.A pre-Budget note by Union Bank of India (UBI) expects fiscal consolidation to continue, projecting a FY27 fiscal deficit of 4.2–4.4% of GDP.“We see fiscal consolidation to continue in FY27, albeit at slower pace, to 4.2% of GDP, in order to preserve policy space in an uncertain world & ahead of Pay Commission implementation in FY28,” UBI said.The report also highlights a shift toward debt-to-GDP targeting, with the Centre aiming to reduce debt to around 50±1% of GDP by FY31.

Agriculture and MSMEs in sharp focus

Agriculture and MSMEs — identified by Sitharaman in Budget 2025 as the first and second growth engines — are expected to remain central.Other expectations include:

Defence spending

Defence allocation will be closely watched as the capex push continues under Make in India and in the backdrop of Operation Sindoor.FY26 saw emergency defence procurement of Rs 40,000 crore and approvals worth Rs 3.3 trillion, nearly double the budgeted defence capital outlay.FICCI has recommended raising defence capital outlay to 30% of the defence budget, increasing DRDO funding by Rs 10,000 crore, and expanding Defence Industrial Corridors to boost exports, which have grown at a 46% CAGR between FY17 and FY24.

AI, Logistics, Telecom: Industry’s big bets

Technology firms expect Budget 2026–27 to accelerate AI adoption, digital infrastructure and innovation. The Economic Survey described AI as an economic strategy, advocating a bottom-up, sector-specific approach.Former Tech Mahindra CEO CP Gurnani said the Survey “brilliantly captures India’s AI momentum”.“India’s way forward is exciting, which is to leverage our engineering strength to create affordable, human-centric AI that solves local challenges first, then scales globally,” he told PTI.Logistics firm FarEye called for policy support for autonomous logistics and applied AI, while GlobalLogic said the Budget offers a chance to move from digital-first to intelligence-first infrastructure.

Balancing growth, revenue and global risks

Despite pressure on revenues from tax cuts and the end of the GST compensation cess, capital expenditure is expected to remain the Budget’s anchor. UBI projects FY27 capex at Rs 12.4 lakh crore, or 3.2% of GDP, with roads, railways and defence as key focus areas.At the same time, Sitharaman faces the challenge of restoring investor confidence, navigating US trade tensions, volatile commodities and a fragile global recovery — all while finding new growth drivers for the economy.

Tariff-hit sectors seek relief

Export-oriented sectors impacted by US tariffs including textiles, apparel, seafood, gems and jewellery, leather and footwear are seeking targeted relief and policy support in Budget 2026.