Union Budget 2026 | India lowers import barriers, custom duty to counter Trump’s tariffs

New Delhi: Union Finance Minister Nirmala Sitharaman on Sunday announced a series of customs duty-related restructuring, including cutting taxes on all dutiable goods imported for personal use from 20 per cent to 10 per cent and allowing duty-free import of raw materials for manufacturing of aircraft and engines, a move that would improve market access for American companies to India.

In the Union Budget 2026-27, Sitharaman also announced to extend the existing basic customs duty exemption on imports of goods required for nuclear power projects till 2035 and expand it for all nuclear plants irrespective of their capacity.

Components and parts required for the manufacture of civilian, training and other aircrafts will be allowed to be imported duty-free. The Budget has also proposed to exempt basic customs duty on raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or overhaul requirements by units in the defence sector.

“To continue weeding out long continuing customs duty exemptions, I propose to remove certain exemptions on items which are being manufactured in India or where the imports are negligible,” Sitharaman said in the budget speech.

According to analysts, lowering of import duty would help in easing trade tension with the US. President Donald Trump's administration has imposed a steep 50 per cent tariff on imports of the majority of Indian products.

While 25 per cent of this is punitive tariff for India’s economic engagement with Russia, another 25 per cent is referred to as reciprocal tariff. The Trump administration has accused India of imposition of high tariffs on American products.

“The Budget’s tariff exemptions align with US strengths in aerospace, nuclear technology, clean energy equipment, electronics, and medical devices—quietly improving market access for US firms to India,” said Global Trade Research Initiative (GTRI) founder Ajay Srivastava.

In nuclear energy, zero customs duty on nuclear-generation equipment, absorber rods, and project imports for all registered nuclear plants until 2035 provides rare long-term certainty for US nuclear equipment makers and technology providers, he added.

To provide relief to patients, particularly those suffering from cancer, the Budget proposes to exempt basic customs duty on 17 drugs or medicines. The Budget also proposes to add 7 more rare diseases for the purposes of exempting import duties on personal imports of drugs, medicines and Food for Special Medical Purposes (FSMP) used in their treatment.

The finance minister has also sought to provide relief to the sectors like textiles, leather and seafood.

Duty-free import limit for inputs used in seafood processing is proposed to be increased from 1 per cent to 3 per cent of export value. It will help lower costs. The scope of duty-free inputs in footwear manufacturing is also expanded to include shoe uppers, not just finished footwear, easing input constraints for exporters.

For garments, leather apparel, and leather or synthetic footwear, the export obligation period is extended from six months to twelve months under Advance Authorisation Scheme. This gives exporters more time to ship orders, reduces working-capital stress, and lowers the risk of penalties.