Budget 2026 Highlights: Income Tax Act 2025, SGBs, and Buyback Changes Explained

The Recent Past (2024-2025): In Budget 2024, the government shifted the tax burden to shareholders, treating buyback proceeds as “Deemed Dividend.” This meant investors paid tax at their slab rate (up to 30%+), making buybacks very unattractive.
Now (Budget 2026): The government has listened to feedback and reclassified buyback income as Capital Gains.
- The Change: Instead of paying slab rates (30%), you will now pay Capital Gains Tax.
- The Rate:
  - Long Term (>12 months): 12.5% (after ₹1.25L exemption).
  - Short Term (<12 months): 20%.
- Implication: This is a massive win for investors. It restores the attractiveness of share buybacks as a tax-efficient way to return cash to shareholders.

2. Sovereign Gold Bonds (SGBs)

Before: Capital gains on redemption were tax-free for any individual who held the bond until maturity, regardless of whether they bought it from the RBI or the secondary market.
Now: The tax exemption on maturity is now available only to original subscribers (those who bought directly from RBI during the issue).
- The Change: If you buy SGBs on the stock exchange (secondary market) and hold to maturity, your gains are now taxable.
- Implication: The “arbitrage” trade—buying discounted SGBs on the exchange for tax-free gains—is over. Secondary market buyers must now factor in the 12.5% LTCG tax.

Before (FY 2025-26): The “New Tax Regime” offered tax-free income up to ₹12 Lakh (via rebate) and a Standard Deduction of ₹75,000.
Now (FY 2026-27): No Change. The government has maintained the status quo.
- Insight: Stability is the focus. If you are a salaried employee earning up to ₹12.75 Lakh, you continue to pay zero tax. The “Old Regime” still exists but is becoming increasingly irrelevant for most taxpayers.

Before: Tax Collected at Source (TCS) on overseas tour packages was often 5% or 20% depending on the amount.
Now: A flat rate of 2% TCS applies to overseas tour packages.
- Implication: This reduces the upfront cash blockage for middle-class families booking international holidays.

Before: Governed by the Income Tax Act, 1961.
Now: A new simplified code, the Income Tax Act, 2025, replaces the 6-decade-old law effective April 1, 2026.
- Insight: The new Act promises simpler language and fewer litigations, aiming to make tax compliance easier for the common man.

Category	2024–25 Rule	New 2026 Rule	Impact
Buybacks	Taxed as Dividend (Slab Rate)	Taxed as Capital Gains (12.5% / 20%)	✅ Positive
Gold (SGB)	Tax-Free for All	Tax-Free only for Original Subscriber	❌ Negative
Slabs	₹12L Tax-Free Limit	No Change	➖ Neutral