Budget 2026: MAT Becomes Final Tax, Customs Duties Slashed for Key Sectors

The Union Budget for 2026–27 signals a shift in both corporate taxation and trade policy, with Finance Minister Nirmala Sitharaman announcing a reworked Minimum Alternate Tax (MAT) regime alongside sweeping customs duty relief for critical sectors including aviation, minerals, healthcare, and fisheries.

Presenting the Budget, Sitharaman said the MAT rate will be reduced from 15% to 14%, and from April 1, 2026, MAT will be treated as the final tax, with no further carry-forward or utilisation of MAT credit. The change marks a clear departure from the existing system, under which companies could offset MAT paid against future tax liabilities, and is aimed at simplifying corporate tax compliance.

Alongside the MAT overhaul, the finance minister announced a series of customs duty rationalisation measures designed to support domestic manufacturing and ease input costs. Basic Customs Duty (BCD) will be exempted on the import of capital goods required for processing critical minerals, a move intended to strengthen India’s downstream mineral value chains. Duty exemptions were also announced on specified components used in the manufacture of microwave ovens.

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In a targeted healthcare intervention, Sitharaman proposed customs duty exemptions on 17 cancer-related drugs, aimed at reducing treatment costs for patients. The aviation sector also received relief, with BCD cuts on parts and components used in the manufacture of civilian aircraft, reinforcing the government’s push to develop India as an aircraft manufacturing and maintenance hub.

Further support was extended to maintenance, repair and overhaul (MRO) activities, with exemptions on raw materials imported for MRO operations and on components used in civil training and other aircraft. In addition, the finance minister announced that fish catch by Indian vessels in special economic zones (SEZs) or on the high seas will be made duty-free, offering relief to the fisheries sector at a time when seafood exports face global trade pressures.

Sitharaman also announced a reduction in the tariff rate on personal goods imports, cutting it from 20% to 10%, easing costs for individual consumers. To improve trade facilitation, she said the government will roll out a Customs Integrated System over the next two years, aimed at faster, technology-driven cargo clearance across government agencies.

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Emphasising the push for digitisation, the finance minister said the government will move towards a seamless digital cargo clearance process, reducing delays at ports and lowering compliance burdens for exporters and importers.

Separately, the Budget also provided relief to individuals making overseas payments for essential needs. The tax collected at source (TCS) rate under the Liberalised Remittance Scheme (LRS) for education and medical purposes has been reduced from 5% to 2%. Kunal Savani, Partner at Cyril Amarchand Mangaldas, described the move as timely relief that improves liquidity for students and families amid rising global costs, while retaining oversight of cross-border remittances.