00:0016th Finance Commission. On 17th November 2025, the 16th Finance Commission submitted its report to the President.
00:12As mandated under Article 281 of the Constitution, the government is to lay the report along with the explanatory memorandum on the action taken report on the recommendations of the Commission in Parliament.
00:26Which, Sir, Honourable Speaker, you've allowed me to do with the commencement of the session.
00:32The government has accepted the recommendation of the Commission to retain the vertical share of devolution at 41%.
00:40As recommended by the Commission, I have provided 1.4 lakh crores of rupees to the states for the year 2026-2027.
00:54As Finance Commission grants, these include rural and urban local body and disaster management grants.
01:07Fiscal consolidation.
01:10Government has been delivering on our fiscal commitments consistently without compromising on social needs.
01:17To strive towards accepted standards of fiscal management in Budget 25-26, I had indicated that the central government would target reaching a debt-to-GDP ratio of 50 plus or minus 1% by 2030-31.
01:35In line with this, the debt-to-GDP ratio is estimated to be 55.6% of GDP in BE 26-27 compared to 56.1% of GDP in RE 25-26.
01:52A declining debt-to-GDP ratio will gradually free up resources for priority sector lending and expenditure by reducing the outgo on interest payments.
02:06One of the main operational instruments for debt-to-GDP ratio is the fiscal deficit.
02:12I am happy to inform this August House that I fulfilled my commitment made in 2021-2022 to reduce fiscal deficit below 4.5% of GDP by 25-26.
02:28In RE 25-26, the fiscal deficit has been estimated at par with BE of 25-26, 2025-26 at 4.4% of GDP.
02:43In line with the new fiscal prudence path of debt consolidation, the fiscal deficit in BE 26-27 is estimated to be 4.3% of the GDP.
03:00The revised estimates of the non-debt receipts are 34 lakh crore rupees, of which the centre's net tax receipts are 26.7 lakh crore.
03:21The revised estimate of the total expenditure is 49.6 lakh crore rupees, of which the capital expenditure is about 11 lakh crores.
03:34Budget estimates 2026 to 2027.
03:39Coming to 26-27, the non-debt receipts and the total expenditure are estimated as 36.5 lakh crore and 53.5 lakh crore, respectively.
03:53The centre's net tax receipts are estimated at 28.7 lakh crore rupees.
03:59To finance the fiscal deficit, the net market borrowings from dated securities are estimated at 11.7 lakh crore rupees.
04:10The balanced financing is expected to come from small savings and other sources.
04:16The gross market borrowings are estimated at 17.2 lakh crore rupees.
04:23I'll now move to part B.
04:25Part B, direct taxes.
04:38Honorable Speaker, sir, I now present my proposals on direct taxes.
04:45New Income Tax Act.
04:46In July 2024, I announced a comprehensive review of the Income Tax Act, 1961.
04:56This was completed in a record time, and the Income Tax Act 2025 will come into effect from 1st April 2026.
05:04The simplified income tax rules and forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with its requirements.
05:17The forms have been redesigned such that ordinary citizens can comply without difficulty.
05:26Ease of living.
05:26I propose that any interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempt from income tax, and any TDS on this account will be done away with.
05:42I propose to reduce TDS rate on the sale of overseas tour program package from the current 5% and 20% to 2% without any stipulation of amount.
05:58I propose to reduce TDS rate for pursuing education and for medical purposes under the Liberalized Remittance Scheme, popularly known as LRS, from 5% to 2%.
06:16Supply of manpower services is proposed to be specifically brought within the ambit of payment to contractors for the purpose of TDS to avoid ambiguity.
06:28Thus, TDS on these services will be at the rate of either 1% or 2% only.
06:35I propose a scheme for small taxpayers, wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate, instead of filing an application with the assessing officer.
06:53For the ease of taxpayer holding securities in multiple companies, I propose to enable depositories to accept Form 15-G or Form 15-H from the investor and provide it directly to various relevant companies.
07:11I propose to extend time available for revising returns from 31st December to up to 31st March with the payment of a nominal fee.
07:24I also propose to stagger the timeline for filing of tax returns.
07:30Individuals with ITR 1 and ITR 1 and ITR 2 returns will continue to file till 31st July and non-audit business cases or trusts are proposed to be allowed time till 31st August.
07:46TDS on sale of immobile property by a non-resident is proposed to be deducted and deposited through resident buyers and his or her PAN-based chalan instead of requiring a TAN, which is a temporary accounting number.
08:05TDS on sale of immobile property by a non-resident is proposed to be allowed time till 31st August.
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