New Surcharge on Buyback Gains and Enhanced Startup Tax Incentives in Finance Bill 2026

The recently approved Finance Bill 2026 brings significant changes to capital gains taxation and provides a boost to the startup ecosystem. A notable amendment introduces a flat 12% surcharge on capital gains arising from share buybacks for all shareholders.

This new flat surcharge, an amendment to the Finance Bill 2026, is expected to increase the overall tax liability for certain categories of shareholders. Specifically, it could lead to a higher tax outgo for smaller corporate shareholders and middle-income individual taxpayers, while potentially offering some relief to the super-rich compared to previous graded surcharge structures.

Enhanced Tax Holiday for Startups

In a move to further support India's innovation-driven ecosystem, the Finance Bill 2026 also includes an amendment to Section 140 of the Income-Tax Act, 2025. This amendment significantly raises the turnover limit for startup tax holidays from Rs 100 crore to Rs 300 crore. This aligns with recent policy revisions by the Department for Promotion of Industry and Internal Trade (DPIIT) and aims to ensure that fast-growing startups continue to benefit from tax incentives as they scale their operations.

The Bill was passed by the Lok Sabha and is now set to implement these tax proposals announced in the Union Budget for FY27.