
MUMBAI: The following is the breakdown of the budget or income and expenditure of the government as proposed in the budget for fiscal 2026. Stated differently, here is a source heads and expenditure heads of the budget or where does the rupee come from and where does it go from the government coffers.
The Finance Minister (FM) has presented a Rs 50.65-trillion budget for fiscal 2026 which will be primarily funded through tax revenue, borrowings, and non-tax receipts, as per the "where money comes from and where it goes" breakdown.
The biggest component of the rupee is direct taxes (income tax and corporation tax): which forms 39 paise or 39% of the income of the government. The second biggest source of the rupee is borrowings & other liabilities that add up to 24% or 24 paise.
The third biggest source is the indirect taxes (GST & other indirect taxes) which form 18% of the income. Non-tax receipts (dividends, profits, fees) constitutes 9% of the income or 9 paise; Central excise duties fetch 5% and customs duties get in 4% and non-debt capital receipts is the lowest component of fetching just 1%.
Accordingly the FM has budgeted for a gross borrowings of Rs 15.69 trillion and Rs 11.54 trillion in net borrowing for financial year 2026 (FY26), which is slightly lower than the Rs 16.45 trillion budgeted in the revised estimates for FY25, indicating a move towards fiscal consolidation. Thus, the finance ministry has budgeted a 4.4% fiscal deficit for FY26, which is 10 basis points lower than previously planned. For FY25, the fiscal deficit target has also been reduced by 10 basis points, now standing at 4.8% of GDP.
Central sector schemes (excluding defense and subsidies) account for 16% of the budget. Defence, Finance Commission transfers and other grants to states, and Centrally-sponsored schemes each take up 8%. Major subsidies (food, fertilizer, and fuel) consume 6%, while pensions for central government employees and politicians make up 4%. Other miscellaneous expenditures constitute another 8%.
Interest payments remain the single largest expense, totaling Rs 12.76 trillion, reflecting the high debt servicing burden. The states' share of taxes and duties, at Rs 14.22 trillion, is a crucial part of devolution.
Defence spending has been increased to Rs 4.91 trillion, up from Rs 4.56 trillion in the revised estimates for FY25.
Major subsidies for food, fertilizer, and petroleum total Rs 4.26 trillion, with food subsidies at Rs 2.03 trillion, fertilizer at Rs 1.68 trillion, and petroleum at Rs 12,100 crore.
Capital expenditure is projected at Rs 11.21 trillion for this fiscal year, as the government continues to prioritise infrastructure spending to boost economic growth while maintaining fiscal discipline.