Budget 2026 Analysis: Understanding ₹12.2L Crore Capex and Implications of Unchanged Capital Gains Tax

The Union Budget February 1, 2026, presented at 11 AM, has sparked intense discussions across India’s financial and business communities. With a record capital expenditure (capex) of ₹12.2 lakh crore and a fiscal deficit target of 4.3% for FY27, the government signals a clear focus on infrastructure and fiscal prudence. Yet, the decision to keep the capital gains tax unchanged has left many investors disappointed. This post breaks down the key highlights of Budget 2026-27 and explores what these numbers mean for taxpayers, investors, and the broader economy.

Record Infrastructure Spending with ₹12.2 Lakh Crore Capex

One of the most talked-about aspects of the Budget 2026 is the ₹12.2 lakh crore capital expenditure, marking the highest-ever allocation for infrastructure development. This represents a 10.25% increase in the railways budget, reflecting the government’s commitment to modernizing transport and connectivity.

This massive capex aims to boost economic growth by creating jobs, improving logistics, and attracting private investment. For infrastructure sector stakeholders, this is a signal of sustained government support. Projects in roads, railways, urban development, and energy are expected to accelerate, which could improve supply chains and reduce costs for businesses.

For example, the increased railways allocation will likely fund new lines, electrification, and station upgrades, benefiting both freight and passenger services. This can lead to faster movement of goods and people, enhancing productivity.

Fiscal Deficit at 4.3% Shows Prudent Consolidation

The fiscal deficit for FY27 is set at 4.3%, slightly lower than the 4.4% estimated for FY26. This reflects a cautious approach to managing government borrowing while still investing heavily in growth-driving sectors.

Maintaining fiscal discipline is crucial to keep inflation in check and ensure sustainable economic health. The government’s plan to reduce the deficit gradually shows a balance between spending and financial stability.

Capital Gains Tax Remains Unchanged, Investor Disappointment

Despite the positive signals on spending, the capital gains tax remains unchanged at 12.5% for long-term capital gains (LTCG) and 20% for short-term capital gains (STCG) on equity. This decision has disappointed many investors who hoped for tax relief to boost market participation.

The unchanged rates mean that equity investors will continue to face the same tax burden on profits, which some see as a missed opportunity to encourage more investment in the stock market. This is especially relevant given the growing interest in equities among the middle class and salaried individuals.

Section 80C Limit Still at ₹1.5 Lakh After 12 Years

Another point of note is the Section 80C deduction limit, which remains at ₹1.5 lakh, unchanged since 2014. This limit allows taxpayers to reduce their taxable income by investing in specified savings instruments.

For many middle-class taxpayers, this means no additional tax relief despite inflation and rising living costs. The stagnant limit has been a long-standing concern for salaried individuals seeking greater tax benefits.

Part B Reforms Break 75-Year Tradition and Outline Economic Vision

The Budget’s Part B reforms mark a significant shift by breaking a 75-year tradition. These reforms outline a clear economic vision focused on modernization, transparency, and efficiency in governance.

While the details are complex, the reforms aim to improve public sector performance and align policies with global best practices. This could lead to better service delivery and stronger economic fundamentals over time.

₹3.16 Lakh Crore Dividends Expected from RBI, Banks, and Financial Institutions

The government expects to receive ₹3.16 lakh crore in dividends from the Reserve Bank of India, banks, and financial institutions. This revenue will help fund government programs without increasing taxes or borrowing.

This dividend income reflects the profitability of public sector entities and their contribution to the national exchequer. It also reduces the pressure on fiscal deficit management.

Middle-Class Income Tax Relief Remains Unchanged

The Budget confirms that the middle-class income tax exemption remains at ₹12 lakh, with no additional relief this year. This means taxpayers earning up to ₹12 lakh annually continue to enjoy tax-free income up to this threshold.

While this provides some comfort to middle-income earners, many had hoped for increased relief to offset inflation and rising expenses. The decision suggests the government’s focus remains on broader economic reforms rather than immediate tax cuts.

What Budget 2026 Means for Different Stakeholders

• Investors: The unchanged capital gains tax may dampen enthusiasm, but the strong infrastructure push could create new investment opportunities in sectors like construction, transport, and energy.

  
  

• Middle-Class Taxpayers: No new tax relief means planning investments carefully under existing limits like Section 80C remains essential.

  
  

• Infrastructure Sector: The record capex signals growth and job creation, with potential for increased private sector participation.

  
  

• Policy Students and Analysts: The fiscal deficit target and Part B reforms offer insights into the government’s economic priorities and long-term vision.

  
  

Budget 2026 Highlights Trending Online

The Budget 2026 highlights have generated over 33,100 searches, reflecting widespread public interest. Key search terms include:

• Union Budget February 1 2026 (27,100 searches)

• Budget 2026 capex ₹12.2 lakh crore (18,100 searches)

• Capital gains tax Budget 2026 (22,200 searches)

  
  

This shows that taxpayers and investors are keen to understand how the Budget affects their finances and the economy.