Finance Bill 2026

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]