Finance Minister Nirmala Sitharaman announced significant tax reforms during her Union Budget 2026-27 presentation, including taxing buyback proceeds as capital gains for all shareholders, raising Securities Transaction Tax (STT) on commodity futures, and reducing Minimum Alternate Tax (MAT). These measures balance revenue generation with corporate relief.
Buyback Proceeds Taxed as Capital Gains
All shareholders will now face capital gains tax on share buyback proceeds, eliminating the previous dividend tax treatment for companies. This aligns buybacks with regular divestments, promoting equitable taxation while discouraging excessive cash returns over productive investments.
STT on Commodity Futures Doubled
Securities Transaction Tax on commodity futures trading rises from 0.02% to 0.05%, increasing transaction costs to moderate speculation. The adjustment targets high-frequency trading while maintaining market liquidity, channeling capital toward long-term investments in physical commodities.
MAT Rate Cut to 14% as Final Tax
Minimum Alternate Tax drops from 15% to 14% and becomes the final tax liability, eliminating subsequent corporate tax adjustments. This simplifies compliance for loss-making firms with book profits, reduces litigation, and provides certainty for strategic financial planning.
These reforms streamline direct taxes, complement the Income Tax Act 2025 rollout, and support fiscal consolidation targeting 4.3% GDP deficit while funding ₹12.2 lakh crore infrastructure spending.
