Source: TH
Context:
Finance Bill 2026 passed in Lok Sabha with 32 amendments
- Presented by Nirmala Sitharaman
- Key changes:
- 12% surcharge on buyback-related capital gains for promoters
- Startup tax holiday threshold increased to ₹300 crore
- Minimum 30 days for response in reassessment cases
- Focus: Tax clarity, ease of compliance, support to startups
What is the Finance Bill?
The Finance Bill is a legislative proposal that contains taxation measures announced in the Union Budget.
- It gives legal effect to tax proposals
- Passed by Parliament and becomes the Finance Act
What is Share Buyback?
A buyback occurs when a company repurchases its own shares from shareholders.
- Used to return surplus cash
- Improves financial ratios and share value
Tax change:
- Earlier: Company paid buyback tax
- Now: Tax shifted to shareholders as capital gains
What is Capital Gains Tax?
Capital gains tax is levied on profit earned from sale or transfer of assets.
- Short-term and long-term categories
- In buyback: treated as capital gains income
What is Surcharge?
Surcharge is an additional tax levied on higher-income taxpayers.
- Applied over normal tax
- New rule: 12% surcharge on promoter buyback gains
- Brings clarity in taxation
What is Startup Tax Holiday?
A tax benefit given to eligible startups.
- 100% profit deduction for 3 years
Change:
- Earlier limit: ₹100 crore turnover
- New limit: ₹300 crore
Impact:
- More startups eligible
- Boost to innovation and growth
What is Reassessment?
Reassessment allows tax authorities to reopen past returns.
- Used in cases of suspected tax evasion
New rule:
- Minimum 30 days must be given to taxpayer to respond
- Improves fairness and reduces harassment
Important for which exam?
RBI Grade B
- Phase 1:
- Budget and taxation
- Phase 2:
- ESI: Fiscal policy, startups
- FM: Capital markets, taxation
NABARD Grade A/B
- Phase 1:
- ESI: Economic policy
- Phase 2:
- ESI: Startup ecosystem, reforms
SEBI Grade A
MCQs
Q.1) What is the Finance Bill?
[1] Monetary policy tool
[2] Law implementing budget taxation proposals
[3] Trade agreement
[4] Banking regulation
Q.2) Where is the Finance Bill passed?
[1] RBI
[2] Lok Sabha
[3] SEBI
[4] Supreme Court
Q.3) What is share buyback?
[1] Sale of shares
[2] Company repurchasing its shares
[3] Issue of new shares
[4] Dividend payment
Q.4) What is capital gains tax?
[1] Tax on income
[2] Tax on profit from asset sale
[3] Tax on imports
[4] Tax on exports
Q.5) What surcharge is applied on buyback gains?
[1] 5%
[2] 10%
[3] 12%
[4] 15%
ANSWERS
1 → [2]
2 → [2]
3 → [2]
4 → [2]
5 → [3]
