India’s Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, delivers fiscal discipline with ₹12.2 lakh crore capital expenditure, a 4.3% fiscal deficit, and debt-to-GDP ratio at 55.6%. Targeting 7%+ GDP growth through “Yuva Shakti,” it streamlines taxes and boosts sectors critical for UK-India trade under the upcoming CETA.
Fiscal Backbone
Public capex of ₹12.2 lakh crore anchors ₹53.5 lakh crore total spending, crowding in private investment. Revenue from GST and direct taxes funds 90%+ of outlays, minimizing borrowings. MSME credit guarantees and TReDS mandates reduce NPAs, stabilizing SME balance sheets for cross-border operations.
Tax Compliance Reforms
- New Income Tax Act effective April 2026 rationalizes slabs and deductions; limits litigation with 10% pre-deposit for appeals.
- TCS reduced to 2% on education, medical, and tours; TDS clarified for manpower outsourcing, aligning with 18% GST.
- IT safe harbour extended to ₹2,000 crore; data centre tax holiday to 2047; PROI equity investments allowed up to 24% for overseas individuals.
| Sector | Key Provisions | Financial Implications for UK Trade |
| Manufacturing | ₹10,000 cr Biopharma SHAKTI; ₹40,000 cr electronics; rare earth corridors; 200 cluster revivals | Accelerated depreciation enhances EBITDA; transfer pricing simplifies UK JV accounting |
| Infrastructure | 7 high-speed rail corridors; ₹20,000 cr CCUS; City Economic Regions (₹5,000 cr each) | PPP viability gap funding aids forex hedging; lower CETA duties on UK engineering goods |
| MSMEs | ₹10,000 cr Growth Fund; TReDS mandates; Corporate Mitras for compliance | Invoice discounting cuts DPO from 90 to 45 days; faster input credits for UK exporters |
| Services | 100,000 health pros; AVGC labs in 15,000 schools; 5 medical tourism hubs | Safe harbour minimizes MAT/AMT; targets 10% global services share for UK IT/fintech |
UK Trade Advantages
CETA, effective H1 2026, cuts tariffs on 90% UK goods—whisky from 150% to 40%, cars, cosmetics, devices—saving £900M over 10 years. FDI ease in semiconductors/data centres, plus tax perks, drives UK investments. Manufacturing/infra outlays enable supply chain integration, projecting £10B+ bilateral trade growth with SEZ zero-rated exports.
Key Accounting Actions
- Forecast CETA tariff reductions in P&L models for Q1 2026.
- Utilize PROI for FDI; adopt new IT Act for streamlined assessments.
- Optimize MSME audits via TReDS for improved cashflow metrics.
