The Union Budget 2026, presented on Sunday, February 1, 2026, focused heavily on structural reforms under the “Viksit Bharat 2047” roadmap. For the finance sector, the government has moved toward consolidation, enhanced foreign participation, and stricter regulation of speculative markets.
Here are the key points exclusively for the finance sector:
Banking & NBFCs: Structural Overhaul
- High-Level Committee on Banking: A new committee will be formed to comprehensively review the banking sector. The goal is to align Indian banks with a larger, technology-driven economy while ensuring consumer protection.
- NBFC Restructuring: To achieve global scale and operational efficiency, the government announced the restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) as a first step toward consolidating public sector NBFCs.
- Viksit Bharat Vision for NBFCs: Clear targets for credit disbursement and technology adoption have been set for non-banking lenders to ensure they reach underserved markets.
Capital Markets & Bond Market Reforms
- STT Hike in FnO: To discourage “excessive speculation” among retail traders, Securities Transaction Tax (STT) has been increased:
- Equity Futures: Increased from 0.02% to 0.05%.
- Options Premium: Increased from 0.1% to 0.15%.
- Corporate Bond Market: * Introduction of Total Return Swaps (TRS) on corporate bonds to provide better hedging and liquidity.
- Establishment of a market-making framework with access to funds and derivatives on corporate bond indices.
- Municipal Bonds: To encourage cities to raise independent funds, a massive ₹100 crore incentive will be given for a single municipal bond issuance exceeding ₹1,000 crore.
Foreign Investment & Insurance
- FDI in Insurance: In a landmark move, the FDI limit for the insurance sector was raised from 74% to 100%. However, this is conditional: companies must invest the entire premium amount within India.
- Foreign Portfolio Investment (FPI): Individual “Persons Resident Outside India” (PROIs) are now permitted to invest in listed Indian equities via the Portfolio Investment Scheme. The individual limit was doubled from 5% to 10%, with an overall cap of 24%.
- FEMA Review: A comprehensive review of the Foreign Exchange Management (Non-debt Instruments) Rules is underway to simplify the framework for foreign investors.
Digital Finance & Fintech
- UPI & RuPay Incentives: The government allocated ₹2,000 crore to support the zero-MDR (Merchant Discount Rate) ecosystem for UPI and RuPay debit card transactions, specifically for low-value payments.
- Digital Rupee (CBDC): Focus has shifted toward testing offline functionality (using NFC) and “programmability” for specific government transfers, moving closer to a full-scale nationwide launch.
Taxation for Financial Entities
- MAT (Minimum Alternate Tax): For companies opting for the New Tax Regime, MAT has been made a “final tax” and reduced from 15% to 14%.
- Share Buybacks: All share buybacks will now be taxed as capital gains in the hands of the shareholders. Additionally, promoters will face an extra buyback tax, making their effective rate 22% (corporate) or 30% (non-corporate).
- IFSC Units: Tax holidays for units in the International Financial Services Centre (GIFT City) have been extended from 10 to 20 years.
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