The numbers
The Lok Sabha passed the Finance Bill, 2026, with amendments that clarify the surcharge on share buybacks, introducing a flat 12% surcharge. This change is expected to impact small and mid-sized buybacks significantly, as large buybacks exceeding ₹1 crore are already subject to a higher surcharge rate of 15%.
Under the new provisions, the consideration received by a shareholder on buybacks will be treated as a capital gain, taxed at 30% for promoters and 22% for promoter companies. The amendments ensure that the applicable surcharge on buyback income is capped at 12%, providing a clearer tax framework for investors.
The new Income Tax Act, 2025, is set to take effect from 1 April 2026, marking a significant shift in tax policy. Additionally, the turnover limit in the startup tax holiday framework has been raised from ₹100 crore to ₹300 crore, aiming to stimulate growth in the startup ecosystem.
Finance Minister Nirmala Sitharaman highlighted the importance of cooperatives, MSMEs, and farmers for employment generation and economic growth. The government has announced a three-year tax exemption on dividend income for cooperative federations, which is designed to boost the incomes of small cooperative members and encourage participation in the sector.
The budget provision for public capital expenditure exceeds 12 lakh crore rupees, accounting for 3.1% of GDP. This budget is 11.5% higher than the revised estimates for 2025-26, reflecting the government’s commitment to enhancing infrastructure and economic stability.
Furthermore, the government plans to transfer more than 25 lakh crore rupees to the states this year, a move that is expected to bolster state economies and support local development initiatives. Sitharaman stated, “Money will be spent to strengthen the country’s infrastructure,” emphasizing the focus on long-term economic growth.
As the Finance Bill progresses, observers are keenly watching its implementation and the potential impacts on various sectors. The amendments aim to improve income tax administration and provide clarity for investors, but details remain unconfirmed regarding the full extent of its effects on the market.
Rahul Gandhi expressed concerns about the budget’s focus on Artificial Intelligence, noting that it could challenge many jobs in the engineering and IT sectors. This highlights the ongoing debate about balancing technological advancement with employment security in the evolving economic landscape.
