Question 1

The Union Budget process is complete as soon as the Finance Minister presents it in February.

Accepted Answer

The budget is only a proposal until the Appropriation Bill (for spending) and the Finance Bill (for taxation) are passed by Parliament and receive Presidential assent.

Question 2

The President can send the Finance Bill back to the Lok Sabha for reconsideration if they disagree with the tax rates.

Accepted Answer

The Finance Bill is categorized as a Money Bill. Under Article 111 of the Constitution, the President cannot return a Money Bill to Parliament for reconsideration.

Question 3

The Income Tax Act 1961 is completely abolished and has no legal standing after April 1, 2026.

Accepted Answer

While the Income-tax Act 2025 takes over for FY 2026-27 onwards, Section 536 of the new Act ensures continuity. Pending litigation, appeals, and assessments from before April 2026 will still be governed by the 1961 Act.

Question 4

Consider the following statements regarding the Finance Bill 2026 and the transition to the Income Tax Act 2025:
1. The Income Tax Act 2025 completely repeals the 1961 Act without transitional provisions, meaning all pending assessments from FY 2024-25 will be immediately evaluated under the 2025 Act.
2. The Finance Bill 2026 decriminalized tax recovery by stripping the Tax Recovery Officer (TRO) of the power to arrest and detain a taxpayer-in-default.
3. The start-up tax holiday turnover limit was increased to ₹300 crore to align with the revised Department for Promotion of Industry and Internal Trade (DPIIT) guidelines.
How many of the above statements are correct?

Accepted Answer

(b) Only two — Statement 1 is incorrect: Section 536 of the new Income Tax Act 2025 acts as a savings clause, meaning pending litigation and assessments initiated before April 1, 2026, will continue to be governed by the old 1961 Act. Statements 2 and 3 are correct factual provisions finalized during the enactment of the Finance Bill 2026.

Question 5

Match the legislative and tax changes introduced via the Finance Bill 2026 (List I) with their corresponding specifics (List II):

List I:
A. Additional Promoter Tax on Share Buybacks
B. Reassessment Notice under Section 148
C. Offshore Banking Units (OBUs) Tax Holiday
D. Structure of the Income Tax Act 2025

List II:
1. Reduced to exactly 536 Sections
2. Restricted strictly to Section 68 of the Companies Act, 2013
3. Mandates a minimum of 30 days to furnish a return
4. Extended to a total of 20 consecutive years

Select the correct code:

Accepted Answer

(a) A-2, B-3, C-4, D-1 — The Finance Bill 2026 restricted the additional tax on buybacks specifically to domestic companies governed by Section 68 of the Companies Act, 2013 (A-2). It statutorily mandated a minimum 30-day window to respond to reassessment notices (B-3). OBUs in SEZs saw their tax holiday extended to 20 years (C-4). The new Income Tax Act 2025 streamlined the regulatory framework down to 536 sections (D-1).

Question 6

Assertion (A): During the enactment of the Finance Bill 2026, the government restricted the newly introduced additional tax on promoter share buybacks strictly to buybacks undertaken under Section 68 of the Companies Act, 2013.
Reason (R): The government intended to explicitly exempt offshore entities and cross-border capital return structures from the higher tax net to prevent an unintended flight of foreign capital.
Select the correct answer:

Accepted Answer

(a) Both A and R are true and R is the correct explanation of A. — The original budget proposal applied a heavy additional tax broadly on all promoter buybacks. Tax experts warned this penalized offshore capital returns. To correct this unintended consequence, the government introduced a late-stage amendment restricting the tax to Section 68 of the Companies Act, 2013, which only applies to domestic Indian companies. Therefore, the reason correctly explains the motive behind the amendment.

Lok Sabha Passes Finance Bill 2026

Commencement of Multilateral Exercise Malabar 2025