FM: Building ecosystem for improving productivity, employment generation

Finance Minister Nirmala Sitharaman and top officials explain the thinking behind Budget 2026-27, from record capex and tax reforms to disinvestment and global risks

Union Finance Minister Nirmala Sitharaman, along with her team of top bureaucrats, addressed a press conference to throw light on the fine print of Budget 2026-27 — from tax reforms to capex push and global uncertainty. Excerpted by Ruchika Chitravanshi, Monika Yadav & Harsh Kumar

 

The idea behind the Budget

 

FM: We are laying the path and giving a push to the economy to maintain the growth momentum. We are looking at building the ecosystem with structural reforms to make sure that we create an environment for improving productivity, and employment generation. We will ensure that technology is brought in to benefit the common man and above all inclusive development. 

 

 

Capital expenditure

 

FM: The momentum that we gained since after-Covid by increasing public capital expenditure will continue. We’ve announced ₹12.2 trillion through public expenditure this time. This is 4.4 per cent of GDP, the highest in the past 10 years. It could even be the highest, if you were to take earlier data. No increment like this in capital expenditure in a sustained fashion has happened ever before. 

 

Committee for banking reforms

 

M Nagaraju, secretary, Department of Financial Services: There are a large number of aspects relating to banking, including the low credit-to-GDP ratio and expansion of the banking network. We will have Terms of Reference and consult stakeholders.

 

Disinvestment and asset monetisation

 

Arunish Chawla, secretary, Department of Investment and Public Asset Management: We follow a composite strategy for disinvestment and asset monetisation. We keep an aspirational target and we are on track and committed to the logical conclusion of both. 

 

Anuradha Thakur, secretary, Department of Economic Affairs: We will have a strong asset monetisation plan. There will be a pipeline prepared. We hope to reap the dividends from that. 

 

Hike in securities transaction tax

 

Arvind Shrivastava, secretary, Department of Revenue: It is felt that the volume of transaction in futures and options is largely in the realm of heavy speculation, which leads to losses for small retail and unsophisticated investors and the government's intention is to discourage speculative tendency and the increase in rate is essentially in that direction. Even after this increase, however, the rates of STT will remain modest compared to the volume of the transactions happening there. 

 

Global uncertainty

 

FM: Global uncertainty is something which definitely occupies the minds of officials when we are preparing for the Budget, but I won’t attribute it to be the cause for any one step across the board. Uncertainty globally is affecting on many grounds, and we are seized of it. Global uncertainties are of a magnitude that we’ve never seen before. So naturally, we had to assess for ourselves the various ways in which they are playing out.

 

Buybacks

 

Shrivastava: It is not an additional tax, it’s a relief. The buyback tax system was changed to make it a dividend income which is applicable at the income tax rate in the hands of the shareholder. It has been corrected now, and we have put it in the hands of shareholders as a capital gains tax, which in the long term will only be 12.5 per cent. The change made for promoters is the additional buyback tax on them, which again keeps things status quo for them.

 

Government borrowing

 

Thakur: We don’t think borrowings are on the higher side. Net market borrowing includes ₹5.5 trillion which has to be repaid this year. We have a plan on how to manage this.

 

Measures to prevent tax litigation

 

Shrivastava: Both on the direct and indirect taxes, announcement of using “additional amount” in lieu of “penalty” not to be seen as an amnesty scheme. The negative connotation associated with being penalised, creates a situation for a taxpayer to dispute the duty. The window we are giving to the taxpayer is that if you are willing to pay your duty, instead of penalty, the same amount can be paid in the form of an additional amount.

 

For personal income tax, if you are ready to accept the demand and not go for appeal, you need not pay the penalty of 50 per cent. We have expanded this window and included even misreporting cases where the penalty is otherwise 200 per cent. These two essential windows are essentially meant to take care of those situations which is why reference to an honest taxpayer.

 

Data centres

 

Shrivastava: The thought process in this is that the global entity providing cloud based data services uses data centres all over the world. It is very difficult to connect one-on-one as to which data centre has resulted in what kind of revenue. The arrangement we have done is just because that entity will set up data services centres and we will use this as one of the many to provide services globally should not become a cause for uncertainty. Quite naturally, the data services centre which is located in India will be taxed depending on the way it is positioned. What we are excluding from taxation is the global entity which is essentially doing cloud-based services using data services centres across. We do not want it to be deterred from enhancing its business footprint in India to provide such global services.

 

Tax buoyancy

 

Shrivastava: With all these reforms, we expect the tax growth to be faster than that of the economy itself. We expect that the tax revenues will be sufficiently buoyant in the coming year.