What Happened
- Parliament approved the Finance Bill 2026, formally completing the legislative process for the Union Budget 2026-27 presented by Finance Minister Nirmala Sitharaman on February 1, 2026.
- The Lok Sabha passed the Finance Bill with 32 government-proposed amendments before it was sent to the Rajya Sabha for consideration.
- Key changes include increased Securities Transaction Tax (STT) rates on futures and options trading, and extension of the ITR filing deadline for certain categories of assessees.
- The Finance Bill gives legal effect to the tax proposals announced in the Union Budget; taxes cannot be levied or changed without parliamentary sanction through this bill.
- Under the new Income-tax Act, 2025 (which replaces the Income-tax Act, 1961), the due date for filing returns by non-audit business assessees and trusts was extended from July 31 to August 31.
- Capital expenditure has risen to ₹8.4 lakh crore for April-January FY26, reflecting the government's continued infrastructure push.
Static Topic Bridges
Budget Process and Finance Bill in India
The annual financial cycle in India is governed by Articles 112 to 117 of the Constitution. The Union Budget, presented on February 1 each year, contains the Annual Financial Statement and demands for grants. The Finance Bill, introduced alongside the budget, gives effect to all proposed changes in tax law. Under Article 110, the Finance Bill qualifies as a Money Bill — it can be introduced only in the Lok Sabha, the Rajya Sabha can suggest amendments but cannot reject it, and the President must give assent. The Finance Bill must be passed before April 1 for the new financial year's tax provisions to come into force.
- Relevant Articles: 112 (Annual Financial Statement), 110 (Money Bill definition), 114 (Appropriation Bill)
- Finance Bill: Money Bill under Article 110 — Lok Sabha has overriding authority
- Rajya Sabha role: Can recommend amendments within 14 days; Lok Sabha may accept or reject them
- Finance Bill 2026: 32 government amendments incorporated before passage
- New framework: Income-tax Act, 2025 replaces Income-tax Act, 1961 from FY26 onwards
Connection to this news: The Finance Bill 2026's passage through Parliament is the constitutionally mandated step that converts budget proposals into law — the STT changes and ITR deadline extension become effective only after presidential assent to this Bill.
Securities Transaction Tax (STT) and Capital Markets Regulation
Securities Transaction Tax was introduced in India in 2004 under Finance Act, 2004 (replacing the earlier Long-Term Capital Gains tax on equity). STT is levied on the purchase and sale of securities listed on recognised stock exchanges — covering equity shares, derivatives (futures and options), and equity-oriented mutual funds. The government periodically revises STT rates to regulate speculative trading and raise revenue from capital markets activity.
- STT on options (sale): Increased from 0.1% to 0.15% of option premium
- STT on exercised options: Increased from 0.125% to 0.15% of intrinsic price
- STT on futures (sale): Increased from 0.02% to 0.05% of traded price
- Introduced: Finance Act, 2004 (Budget 2004-05)
- Regulator for listed securities: SEBI (Securities and Exchange Board of India)
- India's F&O market: One of the world's largest by contract volume; SEBI has separately tightened F&O norms in 2024-25 to reduce retail speculation
Connection to this news: The STT hike on futures and options is a revenue measure in Finance Bill 2026, making derivatives trading slightly more expensive — consistent with broader regulatory concerns about excessive retail participation in F&O segments raised by SEBI in recent years.
Fiscal Consolidation and FRBM Act
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 mandates fiscal discipline by setting targets for reducing fiscal deficit, revenue deficit, and government debt as a proportion of GDP. Finance Minister Nirmala Sitharaman has projected the fiscal deficit at 4.4% of GDP for FY2025-26 and 4.3% for FY2026-27 — part of a medium-term glide path toward the 3% target. India's fiscal deficit for April-January FY26 stood at ₹9.8 lakh crore, which is 63% of the full-year target, indicating the government is broadly on track.
- FRBM Act, 2003: Mandates fiscal deficit reduction targets
- FY26 fiscal deficit target: 4.4% of GDP
- FY27 projected fiscal deficit: 4.3% of GDP (announced in Budget 2026-27)
- April-January FY26 fiscal deficit: ₹9.8 lakh crore (63% of annual target)
- Capital expenditure (Apr-Jan FY26): ₹8.4 lakh crore vs ₹7.6 lakh crore in prior year period
- Net tax receipts (Apr-Jan FY26): ₹20.94 lakh crore (up from ₹19 lakh crore)
- Long-term fiscal deficit target under FRBM: 3% of GDP
Connection to this news: Finance Bill 2026 gives effect to the Budget's revenue proposals (including revised STT rates), directly affecting the government's path to meeting the FY27 fiscal deficit target of 4.3% as laid out under the FRBM framework.
Key Facts & Data
- Finance Bill 2026 passed by Lok Sabha with 32 amendments
- Presented as part of Union Budget 2026-27 on February 1, 2026
- Finance Minister: Nirmala Sitharaman
- STT on options (sale): 0.1% → 0.15% of option premium
- STT on exercised options: 0.125% → 0.15% of intrinsic price
- STT on futures (sale): 0.02% → 0.05% of traded price
- ITR deadline extended: July 31 → August 31 for non-audit business assessees and trusts
- New law: Income-tax Act, 2025 replaces Income-tax Act, 1961
- FY26 fiscal deficit target: 4.4% of GDP
- FY27 projected fiscal deficit: 4.3% of GDP
- Capital expenditure (Apr-Jan FY26): ₹8.4 lakh crore
- Money Bill: Can only be introduced in Lok Sabha (Article 110)