Union Budget 2026 for Kerala PSC
Feb 2026|🟢Current|15 min read|44 entries
Key Takeaway
TheUnion Budgetfor the fiscal year2026-27was presented by Finance MinisterNirmala SitharamanonFebruary 1st, 2026.
Union Budget 2026 for Kerala PSC
TheUnion Budgetfor the fiscal year2026-27was presented by Finance MinisterNirmala SitharamanonFebruary 1st, 2026.
This annual financial statement outlines the government’s revenue, expenditure, taxation, and policy priorities for the upcoming fiscal year, playing a pivotal role in shaping the country's economic direction.
The Union Budget is an important topic for all upcoming Kerala PSC exams (KAS, Degree Level, 10th/Plus Two Level) and UPSC exams.
This year’s budget is historic not only for its content but also for its timing, as it is the first-ever Union Budget to be presented on aSunday.
Quick Facts(6)
| Item | Detail |
|---|---|
| The Finance Minister who presented the Sunday Budget | Nirmala Sitharaman |
| Fiscal Deficit Target | 4.3% of GDP for 2026-27 (down from 4.4% the previous year)* |
| Total Budget Outlay | ₹53.5 Lakh Crore |
| Revenue Deficit | 1.8% of GDP |
| Capital Expenditure (CapEx) | ₹12.2 Lakh Crore (increased by 9%) |
| Net Tax Receipts | ₹28.7 Lakh Crore |
The Finance Minister who presented the Sunday Budget
Nirmala Sitharaman
Fiscal Deficit Target*
4.3% of GDP for 2026-27 (down from 4.4% the previous year)
Total Budget Outlay
₹53.5 Lakh Crore
Revenue Deficit
1.8% of GDP
Capital Expenditure (CapEx)
₹12.2 Lakh Crore (increased by 9%)
Net Tax Receipts
₹28.7 Lakh Crore
* Time-sensitive data — verify for latest information
- Other Expenditures– 7%
- 16th Finance Commission– Vertical tax devolution to States kept at41% (Kerala’s share increased from 1.925% to 2.382%).
🎯Did You Know?Vertical tax devolution: The vertical split of the Union'sdivisible poolof tax revenue between the Central Government and all State Governments collectively. (the States' share of central taxes is retained at 41% ie, apprx.₹15,26,255 Crore)This is the net tax proceeds minus the cost of collection, cesses, and surcharges. Since the Centre has been increasing cesses lately, the actual money states receive may be lower than 41%.Horizotal tax devolution:The formula-based distribution of the collective 41% tax pool among individual states, which determines each state’s specific slice of the revenue (e.g., Kerala’s share of 2.382%, ie, apprx.₹36,355 Crore).
The Core Theme: The "Three Kartavyas"(4)
| Item | Detail |
|---|---|
| Key Statutory Changes:Sections | reduced from 819 sections to 536 sections |
| Chapters | reduced from 47 to 23 |
| New Terminology | The confusing terms 'Assessment Year' & 'Previous Year' are replaced with a single term: 'Tax Year' (commencing April 1) |
| Revenue Neutral | The new Act does not change the tax liability but simplifies the process |
Key Statutory Changes:Sections
reduced from 819 sections to 536 sections
Chapters
reduced from 47 to 23
New Terminology
The confusing terms 'Assessment Year' & 'Previous Year' are replaced with a single term: 'Tax Year' (commencing April 1)
Revenue Neutral
The new Act does not change the tax liability but simplifies the process
Personal Income Tax
There areno changesto thetax slabsor thestandard deductionin this budget, but the existing figures are maintained as they are the 'current' rates for the 2026-27 tax year.
New Tax Regime(5)
| Item | Detail |
|---|---|
| Income Slab: ₹4,00,001 | ₹8,00,000 |
| Income Slab: ₹8,00,001 | ₹12,00,000 |
| Income Slab: ₹12,00,001 | ₹16,00,000 |
| Income Slab: ₹16,00,001 | ₹20,00,000 |
| Income Slab: ₹20,00,001 | ₹24,00,000 |
Income Slab: ₹4,00,001
₹8,00,000
Income Slab: ₹8,00,001
₹12,00,000
Income Slab: ₹12,00,001
₹16,00,000
Income Slab: ₹16,00,001
₹20,00,000
Income Slab: ₹20,00,001
₹24,00,000
ZERO
tax under the new regime.
The deadline to file revised or belated I-T returns has been extended toMarch 31(from December 31).
Major changes took place in the market sector. They are(20)
| Item | Detail |
|---|---|
| MAT (Minimum Alternate Tax) | reduced from 15% to 14%. It is now a 'Final Tax' for companies opting for the new regime.STT (Securities Transaction Tax)–OnFutures– Increased from 0.02% to 0.05%.OnOptions–  Increased from 0.1% to 0.15% |
| Share Buybacks | now taxed as Capital Gains in the hands of shareholders (previously taxed at the company level).TCS (Tax Collection at Source) Relief–Foreign Tour Packages –  reduced from 5% (or 20%) to a flat 2%.LRS (Education/Medical) –  reduced from 5% to 2% for remittances over ₹10 Lakh |
| Sale of Scrap / Minerals | reduced to 2% |
| Bharat-VISTAARFull Form | Virtually Integrated System to Access Agricultural Resources |
| Budget | ₹150 crore for the initial phase (2026-27)* |
| Manufacturing SectorBiopharma SHAKTIFull Form | Strategy for Healthcare Advancement through Knowledge, Technology & Innovation |
| Outlay | ₹10,000 crore over 5 years |
| Aim | To make India a global hub for biologics and biosimilars |
| Rare Earth CorridorsAim | Establishment of dedicated industrial clusters/corridors for mining, processing, and manufacturing of rare earth minerals |
| Partner States | Kerala, Odisha, Andhra Pradesh & Tamil Nadu.It also seeks tostrengthen domestic supply chainsfor critical minerals needed for clean energy and advanced manufacturing, thusreducingdependencyon imports for EV magnets and defense tech |
| Quanta 2026 | A new strategic roadmap launched to accelerate the indigenous development of quantum processors and secure communication |
| Thematic Hubs (T-Hubs) | Four specialized hubs(Quantum Computing, Communication, Sensing, and Materials) are now fully functional as Section-8 companies |
| Key Target | The mission is entering its'Year 3' milestone, aiming to demonstrate intermediate-scale quantum computers (20-50 physical qubits) and satellite-based secure communications over 2,000 km |
| Space Economy: From Research to RealizationDepartment of Space (DoS) Outlay | Allocated ₹13,705.6 crore, representing a 10% rise over revised estimates |
| Space VC Fund | Out of the ₹1,000 crore Venture Capital Fund, ₹250 crore is earmarked for deployment in FY 2026-27 to support nearly 40 space-tech startups* |
| Planetary Science Push | A significant focus on astrophysics with the upgrade of four major facilities:National Large Solar Telescope (for solar research) |
| Strategic Goal | To increase India’s share in the global space economy to10% by 2030* |
| Data Centers & Cloud SovereigntyThe 2026 Budget elevates data centers from 'buildings with servers' to 'Strategic National Infrastructure.'The 2047 Tax Holiday | In a landmark move, a tax holiday until 2047 is proposed for foreign companies providing global cloud services, provided they use specified data centers located in India |
| Data-in-India Mandate | To qualify for tax benefits, these global firms must route services for Indian customers through an Indian reseller entity. This is a strategic push for 'Data Sovereignty.'Safe Harbour Rules– A common safe harbour margin of15%on cost has been introduced for Indian entities providing data center services to their foreign related parties, significantly reducing tax litigation.AI-Ready Infrastructure– The budget allocates support for sourcing40,000 GPUs(Graphics Processing Units) to be hosted in these data centers to power Indian AI startups |
| Green Power Linkage | To address the high energy needs of these hubs, the budget waives customs duty on capital goods forBattery Energy Storage Systems (BESS)and emphasizesNuclear Small Modular Reactors (SMRs)as a 'base load' for data parks |
MAT (Minimum Alternate Tax)
reduced from 15% to 14%. It is now a 'Final Tax' for companies opting for the new regime.STT (Securities Transaction Tax)–OnFutures– Increased from 0.02% to 0.05%.OnOptions–  Increased from 0.1% to 0.15%
Share Buybacks
now taxed as Capital Gains in the hands of shareholders (previously taxed at the company level).TCS (Tax Collection at Source) Relief–Foreign Tour Packages –  reduced from 5% (or 20%) to a flat 2%.LRS (Education/Medical) –  reduced from 5% to 2% for remittances over ₹10 Lakh
Sale of Scrap / Minerals
reduced to 2%
Bharat-VISTAARFull Form
Virtually Integrated System to Access Agricultural Resources
Budget*
₹150 crore for the initial phase (2026-27)
Manufacturing SectorBiopharma SHAKTIFull Form
Strategy for Healthcare Advancement through Knowledge, Technology & Innovation
Outlay
₹10,000 crore over 5 years
Aim
To make India a global hub for biologics and biosimilars
Rare Earth CorridorsAim
Establishment of dedicated industrial clusters/corridors for mining, processing, and manufacturing of rare earth minerals
Partner States
Kerala, Odisha, Andhra Pradesh & Tamil Nadu.It also seeks tostrengthen domestic supply chainsfor critical minerals needed for clean energy and advanced manufacturing, thusreducingdependencyon imports for EV magnets and defense tech
Quanta 2026
A new strategic roadmap launched to accelerate the indigenous development of quantum processors and secure communication
Thematic Hubs (T-Hubs)
Four specialized hubs(Quantum Computing, Communication, Sensing, and Materials) are now fully functional as Section-8 companies
Key Target
The mission is entering its'Year 3' milestone, aiming to demonstrate intermediate-scale quantum computers (20-50 physical qubits) and satellite-based secure communications over 2,000 km
Space Economy: From Research to RealizationDepartment of Space (DoS) Outlay
Allocated ₹13,705.6 crore, representing a 10% rise over revised estimates
Space VC Fund*
Out of the ₹1,000 crore Venture Capital Fund, ₹250 crore is earmarked for deployment in FY 2026-27 to support nearly 40 space-tech startups
Planetary Science Push
A significant focus on astrophysics with the upgrade of four major facilities:National Large Solar Telescope (for solar research)
Strategic Goal*
To increase India’s share in the global space economy to10% by 2030
Data Centers & Cloud SovereigntyThe 2026 Budget elevates data centers from 'buildings with servers' to 'Strategic National Infrastructure.'The 2047 Tax Holiday
In a landmark move, a tax holiday until 2047 is proposed for foreign companies providing global cloud services, provided they use specified data centers located in India
Data-in-India Mandate
To qualify for tax benefits, these global firms must route services for Indian customers through an Indian reseller entity. This is a strategic push for 'Data Sovereignty.'Safe Harbour Rules– A common safe harbour margin of15%on cost has been introduced for Indian entities providing data center services to their foreign related parties, significantly reducing tax litigation.AI-Ready Infrastructure– The budget allocates support for sourcing40,000 GPUs(Graphics Processing Units) to be hosted in these data centers to power Indian AI startups
Green Power Linkage
To address the high energy needs of these hubs, the budget waives customs duty on capital goods forBattery Energy Storage Systems (BESS)and emphasizesNuclear Small Modular Reactors (SMRs)as a 'base load' for data parks
* Time-sensitive data — verify for latest information
Tex-Eco Initiative
In context with theEUandUSAimplementing strict environmental norms (like the Carbon Border Adjustment Mechanism), Indian textiles also need to be 'eco-certified.'
Thus, it aims to promote globally competitive, environmentally sustainable textiles and apparel manufacturing by:
Incentivizing factories that userenewable energyand zero-liquid discharge systems.Promotingcircularity(recycling old clothes into new fibre).Aligning Indian products with international 'Green Market' opportunities.5. Samarth 2.0
The core objective is to upgrade the skilling ecosystem for the next generation of textile workers.
The Samarth 2.0 moves beyond basic stitching skills to tech-heavy training by initiating a deeper collaboration between Industry and Academic Institutions and focusing on Technical Textiles and digital manufacturing tools (AI and IoT in textiles).
Railways
The most talked-about highlight is the announcement of7 High-Speed Rail Corridors(Bullet Train routes) spanning 4,000 km with a projected investment of₹16 lakh crore.
New Announced7 High-Speed Rail Corridors(9)
| Item | Detail |
|---|---|
| Mumbai | Pune (45 mins travel time)Pune – HyderabadHyderabad – BengaluruHyderabad – ChennaiChennai – Bengaluru (1.5 hours travel time)Delhi – VaranasiVaranasi – Siliguri |
| Logistics & WaterwaysTo reduce the logistics cost in India from 14% to under 9%, the budget was introduced:20 New National Waterways | To be operationalized over the next 5 years to move bulk cargo sustainably |
| Coastal Cargo Promotion Scheme | A new subsidy-linked program to encourage industries to shift freight from road/rail to coastal shipping |
| University Townships | Five university townshipswill be created in the industrial and logistic corridors. These zones will host universities, colleges, and research institutions alongside residential complexes to integrate learning with industry.AVGC Content Creator Labs– To boost theOrange Economy, labs will be set up in15,000secondary schools and 500 colleges. These will be spearheaded by theIndian Institute of Creative Technologies (IICT), Mumbai.IP-Backed Lending– A revolutionary move allowing creators to use their Copyrights/Patents as collateral for bank loans instead of physical land or gold.NID Eastern Region– A newNational Institute of Design(NID) will be established in East India via aChallenge Routeto promote design education.🎯Orange Economy (aka Creative Economy)An economic sector where the primary value is derived from human creativity, culture, and intellectual property (IP) rather than physical manufacturing or natural resources |
| Employment & SkillingPM SETU | The flagshipPradhan Mantri Skilling and Employability Transformationthrough Upgraded ITIs (PM SETU) received a massive boost (₹6,140.50 crore) to modernize Industrial Training Institutes.E3 Standing Committee– A high-poweredEducation to Employment and Enterprise(E3) Standing Committee will be formed. Its goal is to recommend measures to make India a global leader in services, targeting a10% global share by 2047 |
| Allied Health Professionals (AHP) | A plan to add100,000 AHPsover thenext five yearsby upgrading existing institutions and setting up new ones in both private and government sectorsServices Sector: IT & Creative PowerThe services sector is being positioned as the primary engine for Viksit Bharat |
| Overseas Education Relief | For families with students abroad, the Tax Collected at Source (TCS) on overseas education remittances under the Liberalised Remittance Scheme (LRS) has been reduced from5% to 2% |
| Astrophysics Promotion | Four telescope infrastructure facilities(including the National Large Solar Telescope) will be upgraded to promoteAstro-Tourismand scientific research services |
| SideNotes:Chairman of 16th Finance Commission | Dr. Arvind Panagariya* |
Mumbai
Pune (45 mins travel time)Pune – HyderabadHyderabad – BengaluruHyderabad – ChennaiChennai – Bengaluru (1.5 hours travel time)Delhi – VaranasiVaranasi – Siliguri
Logistics & WaterwaysTo reduce the logistics cost in India from 14% to under 9%, the budget was introduced:20 New National Waterways
To be operationalized over the next 5 years to move bulk cargo sustainably
Coastal Cargo Promotion Scheme
A new subsidy-linked program to encourage industries to shift freight from road/rail to coastal shipping
University Townships
Five university townshipswill be created in the industrial and logistic corridors. These zones will host universities, colleges, and research institutions alongside residential complexes to integrate learning with industry.AVGC Content Creator Labs– To boost theOrange Economy, labs will be set up in15,000secondary schools and 500 colleges. These will be spearheaded by theIndian Institute of Creative Technologies (IICT), Mumbai.IP-Backed Lending– A revolutionary move allowing creators to use their Copyrights/Patents as collateral for bank loans instead of physical land or gold.NID Eastern Region– A newNational Institute of Design(NID) will be established in East India via aChallenge Routeto promote design education.🎯Orange Economy (aka Creative Economy)An economic sector where the primary value is derived from human creativity, culture, and intellectual property (IP) rather than physical manufacturing or natural resources
Employment & SkillingPM SETU
The flagshipPradhan Mantri Skilling and Employability Transformationthrough Upgraded ITIs (PM SETU) received a massive boost (₹6,140.50 crore) to modernize Industrial Training Institutes.E3 Standing Committee– A high-poweredEducation to Employment and Enterprise(E3) Standing Committee will be formed. Its goal is to recommend measures to make India a global leader in services, targeting a10% global share by 2047
Allied Health Professionals (AHP)
A plan to add100,000 AHPsover thenext five yearsby upgrading existing institutions and setting up new ones in both private and government sectorsServices Sector: IT & Creative PowerThe services sector is being positioned as the primary engine for Viksit Bharat
Overseas Education Relief
For families with students abroad, the Tax Collected at Source (TCS) on overseas education remittances under the Liberalised Remittance Scheme (LRS) has been reduced from5% to 2%
Astrophysics Promotion
Four telescope infrastructure facilities(including the National Large Solar Telescope) will be upgraded to promoteAstro-Tourismand scientific research services
SideNotes:Chairman of 16th Finance Commission*
Dr. Arvind Panagariya
* Time-sensitive data — verify for latest information