The Finance Act, 2026 received Presidential assent on 30 March 2026. Importantly, several provisions evolved between the Finance Bill as introduced in February, and the law as finally enacted.
Here are five key changes with direct corporate impact.
Buyback Taxation: Scope Clarified
Buyback proceeds are now taxable as capital gains in the hands of shareholders. For promoters, an additional tax applies, taking the effective burden to 22% for domestic corporate promoters and 30% for others, plus a 12% surcharge on the additional tax. Non-promoter investors continue under normal capital gains provisions. Critically, the additional promoter tax applies only to buybacks conducted under Section 68 of the Companies Act, 2013. Companies should reassess buyback strategies before proceeding.
Startup Tax Holiday: Threshold Raised
The turnover limit for eligible startups has been increased to Rs 200 crore for regular startups and Rs 300 crore for deep-tech startups, aligning with the DPIIT notification of February 2026. Startups that exited eligibility under the earlier Rs 100 crore threshold should re-evaluate their position with immediate effect.
Reassessment Notices: Minimum Response Time Introduced
A statutory minimum of 30 days has been prescribed for responding to reassessment notices under Section 148. Previously, only a maximum of three months existed with no floor. This brings procedural certainty that was previously absent from the reassessment framework.
Arrest Powers in Tax Recovery: Removed
The Tax Recovery Officer's power to arrest and detain taxpayers for recovery of tax arrears has been abolished. Recovery through attachment of property and bank accounts continues. This marks a significant step in the decriminalisation of the tax recovery framework.
Assessment Approvals: Retrospective Clarity from 1 April 2021
Approvals granted in assessment and reassessment proceedings are now clarified as administrative in nature, with retrospective effect from 1 April 2021. Assessments can no longer be challenged on procedural grounds including absence of a Document Identification Number, missing digital signatures, or inadequacy of reasons recorded. Businesses with pending appeals built on procedural defects in approval should review their litigation positions now.
The Bigger Picture
The Finance Act, 2026 reflects a dual shift: stronger enforcement through retrospective validation of assessment approvals, and greater taxpayer protection through procedural safeguards and the removal of coercive recovery powers. The Act as enacted is the operative document. Budget announcements are proposals. The two are not always identical.