Budget 2026–27: Fiscal deficit set at 4.3%; Rs 1.4 lakh crore devolution to states
Union Budget expands to Rs 53.5 lakh crore in FY27, underscoring sustained public spending commitments
Finance Minister Nirmala Sitharaman presents the Union Budget 2026-27 in the Lok Sabha. (Photo: PTI)
New Delhi, Feb 1: Finance Minister Nirmala Sitharaman, on Sunday, said the government expects the fiscal deficit to be at 4.3% of the GDP in 2026-27, lower than 4.4% projected for the current financial year.
In her 2026-27 Budget speech, Sitharaman also said the government will provide Rs 1.4 lakh crore as tax devolution amount to the states in the next financial year, while the net tax receipts is estimated at Rs 28.7 lakh crore.
The size of the Budget for 2026-27 is pegged at Rs 53.5 lakh crore. In 2026-27, the fiscal deficit is estimated at 4.3%, the Minister said as the government moves on the fiscal prudence path of debt consolidation.
The budgeted fiscal deficit, which is the difference between the government expenditure and income, for the current fiscal (April 2025 to March 2026 or FY26), is estimated at 4.4% of GDP.
The Finance Minister, in her 2024-25 budget speech, had stated that from 2026-27 onwards, fiscal policy would endeavour to maintain the fiscal deficit in a way that the central government debt is on a declining path as a percentage of GDP.
The general government debt-to-GDP ratio was 85% in 2024, which included central government debt of 57%.
A fiscal deficit of 3-4% is considered comfortable and a desirable target for a growing, developing economy like India, aiming to balance economic expansion with financial stability.
In the speech on Sunday, Sitharaman also said the new Income Tax Act, 2025 will be implemented from April 1, and the rules and tax returns forms will be notified shortly.
The Finance Minister also proposed to increase time limit for filing revised income tax (I-T) return from December 31 to March 31, on payment of nominal fee.
The government also proposed reduction in TCS rate for pursuing education and medical education under liberalised remittance scheme from 5% to 2%.
Tax Collected at Source (TCS) rate on sale of overseas tour packages was announced to cut to 2% from 5%. The rate was 20% earlier.
She also proposed a rule-based automated process for small taxpayers in FY27 Budget. In her Budget speech, Sitharaman announced a proposal to exempt award given by Motor Accident Claims Tribunal from income tax.
PTI