Issue: 1131
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UNION BUDGET 2026”
Budget 2026 at a glance: 10 key moves that could shape India’s
economy: Finance
Minister Nirmala Sitharaman on Saturday presented her ninth Union Budget in
Parliament, outlining a mix of fiscal restraint, infrastructure push and
targeted sectoral incentives as the government seeks to balance growth with
stability amid global economic uncertainty and trade tensions.
Fiscal deficit target trimmed: The government pegged the
fiscal deficit for FY27 at 4.3 per cent of GDP, marginally lower than the 4.4
percent target for the current year.
Debt-to-GDP glide path
reaffirmed:
India’s debt-to-GDP ratio is projected to fall to 55.6 per cent in FY27 from
56.1 per cent, with the Centre reiterating its medium-term goal of bringing the
ratio close to 50 per cent by FY31.
Record capital expenditure
outlay:
Capital expenditure is set to cross Rs 12.2 lakh crore for the first time,
aimed at sustaining infrastructure creation and crowding in private investment.
An Infrastructure Risk Guarantee Fund will also be created to provide partial
credit guarantees to lenders.
Tax holiday for global cloud
players:
A landmark tax holiday till 2047 was proposed for foreign companies providing
global cloud services using data centres located in India, a move designed to
position the country as a major AI and data infrastructure hub while ensuring
Indian reseller participation.
Major MSME and SME support
package:
The Budget announced a Rs 10,000 crore SME Growth Fund to create “SME
champions” and a Rs 2,000 crore top-up to the Self-Reliant India Fund.
Mandatory use of the TReDS platform for CPSE payments to MSMEs and a new cadre
of “Corporate Mitras” aim to ease liquidity and compliance challenges.
Higher securities transaction
tax on derivatives: To curb excessive speculation in futures and
options, the securities transaction tax on futures was raised from 0.02 per
cent to 0.05 per cent, while the levy on option premiums and exercise was also
increased.
Buybacks to be taxed as
capital gains:
Share buybacks will now be taxed in the hands of shareholders as capital gains,
with promoters facing an additional buyback tax, tightening rules around corporate
cash returns.
Rare earth corridors in four
states:
Dedicated rare earth corridors will be developed in Odisha, Kerala, Andhra
Pradesh and Tamil Nadu to strengthen domestic mining, processing and
manufacturing of critical minerals and reduce import dependence.
High-speed rail and freight
corridor push:
Seven new high-speed rail corridors connecting major economic centres were
announced alongside a new dedicated freight corridor from Dankuni to Surat to
promote faster, greener passenger and cargo movement.
TCS on overseas education
& medical remittances cut to 2%: The Tax Collected at Source
(TCS) under the Liberalised Remittance Scheme (LRS) for education and medical
purposes has been reduced from 5% to 2%.
(Moneycontrol)
Finance Commission suggests 3% borrowing cap for states, flags
risks from off-budget loans: The Finance Commission has recommended that
States’ fiscal deficits remain capped at 3 percent of GSDP during the award
period 2026–27 to 2030–31, while discouraging the use of off-budget borrowings,
warning that such practices could weaken their financial stability in the
future. “States should completely discontinue the practice of incurring off?budget borrowings and bring all such borrowings
onto their budgets. If, for any reason, off?budget borrowings are undertaken, there should be a
framework for their regular annual reporting, preferably as part of the
budget,” the 16th Finance Commission said in its report. It also recommended
that the Comptroller and Auditor General (CAG) include disclosures on
off-budget borrowings in State Finance Accounts.
(Moneycontrol)
Karnataka is biggest gainer, Madhya Pradesh biggest loser under
16th Finance Commission formula: Karnataka is set to emerge as the biggest
beneficiary of the Sixteenth Finance Commission’s (16FC) horizontal devolution
formula, while Madhya Pradesh is poised to take the largest hit, as the panel
sharpens its focus on economic efficiency alongside equity. Under the new
formula, Karnataka’s share in the Centre’s tax devolution has been raised to
4.13 percent for 2026–31, up from 3.65 percent under the Fifteenth Finance
Commission. In absolute terms, this translates into an additional Rs 7,387
crore, taking Karnataka’s allocation to Rs 63,050 crore, compared with Rs
55,663 crore Karnataka would have received under the previous formula. An
important driver behind the shift is the introduction of a 10 percent weight
for “contribution to GDP” in the devolution formula—a criterion aimed at
rewarding states with stronger economic performance.
(Moneycontrol)
STT on F&O hiked to curb excessive speculation, address
systemic risk: Revenue Secretary: Revenue
Secretary Arvind Shrivastava on February 1 clarified that the only change to
Securities Transaction Tax (STT) rates in the Union Budget is for the futures
and options segment, with all other STT rates remaining unchanged. Explaining
the rationale behind the move, he said the government increased STT on futures
and options to address rising systemic risk in the derivatives market,
emphasising that it did not want to encourage excessive speculation. In the
Budget presented on Sunday, the finance minister raised the STT on futures
contracts to 0.05 percent from 0.02 percent and on options to 0.15 percent from
0.10 percent, a sharp increase aimed at curbing speculative trading in the
derivatives market.
(Moneycontrol)
High-level panel to review bank ownership and consolidation for
Viksit Bharat: A
high-level committee on banking for Viksit Bharat is expected to examine bank
ownership structures, seeking to build fewer but bigger lenders with sufficient
balance sheet arsenal to power India’s entry into the elite league of developed
nations that offer robust and reliable infrastructure, high per capita incomes
and quality of life, and a financing ecosystem capable of undergirding
long-gestation projects. Besides the likely consolidation
of smaller government banks, the panel is also likely to review the
longstanding issue of aligning voting rights with ownership stakes in private
sector banks. That’s also expected to quicken the pace of consolidation.
(Economic Times)
Govt borrowing challenge passed on to RBI: Finance Minister Nirmala
Sitharaman’s “futuristic” Budget proposes a high-level banking committee for
“Viksit Bharat”. It will review a sector with strong balance sheets, improved
asset quality and presence in over 98 per cent of India’s villages, and
recommend how to support the next phase of growth while safeguarding financial
stability, inclusion and consumer protection. In the financial sector, the stated
theme is consumer protection. Both the finance ministry and the Reserve Bank of
India (RBI) have been sensitising the sector. Beyond this, the committee will
probably chart a second round of consolidation in public-sector banking (PSB). In
2017, State Bank of India (SBI) merged five associate banks and Bharatiya
Mahila Bank into itself. By 2020, mergers among PSBs cut their number from 27
to 12. Most PSBs gained scale through this. A further round could create even
larger PSBs and reduce the count again; SBI remains the only Indian bank among
the world’s top 50 by assets.
(Business Standard)
UPI transactions soar to record at Rs 28.33 lakh crore in
January: Unified Payments Interface transactions hit a
new high in January. Indians made 21.7 billion UPI payments. The total value of
these transactions reached Rs 28.33 lakh crore. This shows a significant
increase from the previous month. The growth in UPI usage continues to be
strong. This digital payment system is rapidly expanding its reach across the
nation.
(Economic Times)
Tax holiday for GIFT City businesses doubled to 20 years: The Budget has extended the
tax holiday for corporates in International Financial Services Centre to 20
years from 10 years. The provisions of Section 147 provides for deduction of
100 per cent on certain incomes to the units of IFSC and Offshore Business
Units (OBC). This is available for 10 consecutive years out of 15 years for
units in IFSC and 10 consecutive years for OBUs. To increase the
competitiveness of IFSC, the Budget has proposed to increase the period of
deduction to 20 consecutive years out of 25 years for units in IFSC and 20
consecutive years for OBUs. It also proposed that the
business income of these units from IFSC after the expiry of period of
deduction will be taxed at rate of 15 per cent, it said. These amendments will
take effect from April 1.
(Business Line)
Centre proposes TreDS to be settlement platform for MSME
purchases by CPSEs: With Trade Receivables Discounting System (TReDS)
platforms helping micro, small and medium enterprises (MSMEs) receive ?7 lakh
crore in funds, Union Finance Minister Nirmala Sitharaman today proposed
mandating TReDS as the transaction settlement platform for all purchases made
from MSMEs by central public sector enterprises (CPSEs). “To leverage its
(TreDS) full potential, I propose...to mandate TReDS as the transaction
settlement platform for all purchases from MSMEs by CPSEs, serving as a
benchmark for other corporates,” Sitharaman said presenting the Union Budget
for FY27. The finance minister also introduced a credit
guarantee support mechanism through CGTMSE for invoice discounting on TReDS
platforms. She also proposed linking government e-marketplace with TReDS for
sharing information with financiers about government purchases from MSMEs,
encouraging cheaper and quicker financing.
(Business Line)
Tariff rate on all dutiable goods imported for personal use to
be reduced from 20 per cent to 10 per cent: The Union Budget proposes to
reduce the tariff rate on all dutiable goods imported for personal use from 20
per cent to 10 per cent to rationalize the customs duty structure. 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.
(PiB)
SGB tax change: secondary market buyers lose capital gains exemption
from April: The
Budget has clarified that the capital gains tax exemption on sovereign gold
bonds will not apply to investors who purchase them in the secondary market and
hold them to maturity. The shift means only original
subscribers who hold their SGBs to maturity will get the full tax exemption,
while all second-hand buyers will lose it from April 1.
There
are 46 outstanding sovereign gold bonds traded on the stock exchanges and their
maturing starts from December 2026 to December 2031.
(Business Line)
Government eyes Rs 3.16 lakh crore dividend in 2026-27: For 2026-27, the government has projected
dividends of 3.16 lakh crore from the Reserve Bank of India (RBI) and public
sector banks, 4% higher than the revised estimate of3.06 lakh crore in FY26. Of
this, the RBI had contributed 2.68 lakh crore in FY26, while banks added 36,000
crore. The FY26 dividend figure was later revised upward from Rs 2.56 lakh
crore, a 19% surge. The government has budgeted an
RBI dividend broadly in line with last year, around Rs 2.8 lakh crore, with an
additional Rs 40,000 crore assumed from PSU banks. This makes the overall
dividend estimate of Rs 3.16 lakh crore.
(Financial Express)
Finance Bill 2026 rewrites MAT rules, nudges firms to
concessional tax regime: The Finance Bill, 2026 has overhauled India’s
minimum alternate tax (MAT) framework, lowering the MAT rate from 15% to 14%
and sharply limiting the use of accumulated MAT credits. The changes are aimed
at nudging companies toward the concessional 22% corporate tax regime while
streamlining the corporate tax calculations. Under the proposed changes,
MAT will become a final tax from April 1, 2026, and no new MAT credits will be
allowed to accrue thereafter. Companies opting for the concessional corporate
tax regime will be permitted to set off brought-forward MAT credit accumulated
up to March 31, 2026, but only up to 25% of their tax liability in a year. Such
credits will remain usable only within the existing 15-year carry-forward
window from the year in which they arose.
(Economic Times)
PRIMARY DEFICIT
·
Primary
deficit is the fiscal deficit minus interest payments on previous borrowings,
representing the government's current-year borrowing requirement for
operational expenses excluding debt servicing.
·
It indicates fiscal health by
showing if revenue covers non-interest spending, with lower levels signifying
better fiscal management.
RBI KEY RATES
Repo
Rate: 5.25%
SDF:
5.00%
MSF
/Bank Rate: 5.50%
CRR:
3.00%
SLR:
18.00%
FOREX RATES (RBI
REF. RATE)
INR /
1 USD : 91.8983
INR /
1 GBP : 126.3834
INR /
1 EUR : 109.5661
INR
/100 JPY: 59.7200
EQUITY INDEX
Sensex:
80722.94 (-1546.84)
NIFTY: 24825.45 (- 495.20)
Bnk
NIFTY: 58417.20 (-1193.25)
World Wetlands Day: 2nd February is globally celebrated as World Wetlands Day to raise
awareness about the vital role of wetlands for people and the planet. It marks
the anniversary of the Convention on Wetlands (Ramsar Convention) adopted in
1971. The 2026 theme is "Wetlands and traditional knowledge: Celebrating
cultural heritage".
Historical events: February 2nd
marks major milestones in history, including the 1814 establishment of the
Calcutta Museum (now Indian Museum) and the 1949 founding of the Press Trust of
India (PTI). Globally, it is recognized as World Wetlands Day. Key historical
moments include the 1943 Soviet victory at Stalingrad and the 1990
de-legalization of the ANC in South Africa.
****Have a nice
Day****
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