Syllabus: GS2/ Polity and Governance
Context
- The Finance Bill, 2026 was passed by the Lok Sabha marking a significant step in concluding the Union Budget process for the 2026-27 financial year.
What is the Finance Bill?
- The Finance Bill is a Money Bill that gives effect to the taxation and financial proposals of the Union Government.
- It is introduced annually after the presentation of the Union Budget under Article 110 of the Constitution. It includes provisions related to;
- Provisions related to direct and indirect taxes.
- Amendments to existing tax laws.
- Changes in financial regulations and policy framework.
Significance of the Bill
- Provides legal sanction to tax proposals, ensuring revenue mobilisation.
- Promotes ease of doing business through tax simplification.
- Encourages investment and consumption via targeted tax measures.
- Strengthens India’s path towards fiscal consolidation and growth.
How is it different from the Appropriation Bill?
- The Appropriation Bill is introduced under Article 114 of the Constitution of India to authorise the withdrawal of funds from the Consolidated Fund of India to meet government expenditure.
- It deals with appropriation of funds already voted by the Lok Sabha and charged expenditure, as provided under Article 114(3).
- The Bill does not allow any amendments, as it only seeks approval for expenditure already voted.
- It is introduced after the Demands for Grants are voted by the Lok Sabha under Article 113.
- Both the Finance Bill and Appropriation Bill are classified as Money Bills.
Key Tax & Financial Highlights
- Support for Key Sectors:
- Digital infrastructure and electronics manufacturing.
- Marine products, leather industry, and critical minerals.
- Nuclear energy and strategic sectors.
- TCS Reductions: Tax Collected at Source (TCS) on overseas tour packages and remittances for education and medical purposes (under LRS) has been reduced to 2%.
- Stock Market Taxes: Securities Transaction Tax (STT) on Futures increased to 0.05% (from 0.02%), while the rate for Options rose to 0.15%.
- Customs Exemptions: Basic customs duty has been exempted for 17 life-saving cancer drugs.
- Corporate Buybacks: All share buybacks are now taxed as capital gains; promoters face an additional buyback tax.
- Principles of Finance Bill 2026:
- Trust-based tax administration,
- Improving the ease of living for the common citizens,
- Empowering MSMEs, farmers and cooperatives,
- Strengthening India as a global business hub and
- Enabling seamless trade facilitation and customs reforms.
Key Economic Terms
- Tax Collected at Source (TCS) is a tax collected by the seller from the buyer at the time of sale of specified goods or services, as per Section 206C of the Income Tax Act, 1961.
- The seller collects a percentage of the transaction value as tax and deposits it with the government.
- Securities Transaction Tax (STT) is a direct tax levied on the purchase and sale of securities traded on recognised stock exchanges in India.
- It was introduced in 2004 through the Finance Act. The tax is collected by stock exchanges and deposited with the government.
Fiscal Estimates for FY 2026-27
- Total Expenditure: ₹53.47 lakh crore, marking a 7.7% increase over the previous fiscal year.
- The total capital expenditure proposed for the next fiscal is ₹12.2 lakh crore.
- It proposes a gross tax revenue collection of ₹44.04 lakh crore and a gross borrowing of ₹17.2 lakh crore.
- The fiscal deficit for FY27 is projected at 4.3% of GDP, lower than 4.4% in the current fiscal.
Source: AIR
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