In the Union Budget 2026-27, it is estimated that 64 paise out of every rupee in the government's treasury will come from direct and indirect taxes. This was revealed in the Budget documents presented to Parliament by Finance Minister Nirmala Sitharaman on Sunday. The documents offer a detailed breakdown of the sources of the government's income and its expenditure.
The budget estimates a total expenditure of ₹53.5 lakh crore and sets a gross revenue target of ₹44.04 lakh crore.
Breaking down the tax revenue, income tax is expected to contribute 21 paise, while corporation tax will contribute 18 paise. The Goods and Services Tax (GST) is estimated to account for 15 paise. The government also expects to collect 6 paise through excise duty and 4 paise through customs duty for every rupee it collects.
Apart from tax revenue, 24 paise will be raised through borrowings and other liabilities. Non-tax revenue, including disinvestment, will account for 10 paise. Non-debt capital receipts will contribute the remaining 2 paise. In comparison, the 2025 budget projected 39 paise from direct taxes, including 22 paise from individual income tax and 17 paise from corporate tax. GST was projected to bring in 18 paise as the largest source of indirect taxes, excise duty 5 paise, customs duty 4 paise, borrowings and other liabilities 24 paise, non-tax income 9 paise, and non-debt capital receipts 1 paise.
On the expenditure side, the largest allocation is for states' share of taxes and duties, accounting for 22 paise of every rupee spent. Interest payments account for 20 paise. 11 paise goes towards defense expenditure. Spending on central sector schemes constitutes 17 paise, while centrally sponsored schemes receive 8 paise. Finance Commission transfers and other statutory transfers are earmarked at 7 paise per rupee, while subsidies account for 6 paise and pensions 2 paise. The government will allocate 7 paise of every rupee to other miscellaneous expenditures.
The Union Budget 2026 continues to focus on job creation, incentives for manufacturing, and custom duty cuts to boost exports. Simplified income tax rules and forms, following a comprehensive review of the Income Tax Act, 1961, are expected to be notified shortly, with the Income Tax Act, 2025, coming into effect on April 1, 2026. To boost investment in data centers, the government is proposing a tax holiday until 2047 for foreign companies providing cloud services globally from data centers in India, provided they serve Indian customers through Indian resellers.
The government is set to borrow ₹17.2 lakh crore on a gross basis in 2026-27, which is an increase from the ₹14.8 lakh crore budgeted for 2025-26 and will be the biggest component of the Centre's fiscal deficit financing.