Despite five southern States being assigned a collectively higher share under the vertical distribution scheme of the 16th Finance Commission (FC) than in the past, Tamil Nadu’s share has seen only a marginal rise.

The share of Tamil Nadu, which was 4.079% in the 15th FC, rose to 4.097% now, accounting for a rate of increase of 0.44%. This was followed by Telangana with a rise of 3.43% and Andhra Pradesh with 4.2%. Only Karnataka and Kerala have witnessed a double-digit rate of increase — 13.27% and 23.74%. At the all-India level, Kerala’s degree of rise is only next to Haryana’s 24.52%, while the third slot goes to Karnataka.

16th Finance Commission report tabled, states’ tax share retained at 41%

The Centre’s decision to retain States’ share in the common pool of taxes at 41% for 2026–31 has sparked criticism from opposition leaders. Finance Minister Nirmala Sitharaman tabled the Sixteenth Finance Commission report in the Lok Sabha on February 1, 2026, setting the framework for tax devolution between the Centre and States. Several States, including Karnataka and Kerala, had sought a higher 50% share, citing rising fiscal responsibilities.
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Finance Minister Nirmala Sitahraman on Sunday (February 1, 2026) proposed a tax exemption on awards given by the Motor Accident Claims Tribunal in the Union Budget 2026-27.

According to the Budget document, the provisions of the Motor Vehicles Act, 1988, inter alia, provide for compensation and an interest on the compensation to be awarded by the tribunal to an individual or his/her legal heir, on account of death or permanent disability or any bodily injury under the said Act.

“In order to alleviate sufferings of victims of such accident and their family, which may cause extreme hardship to the aggrieved person and family, it is proposed to amend the said Schedule to provide exemption to an individual or his legal heir, on any income in the nature of interest under the Motor Vehicles Act, 1988,” it said.

The document said these amendments will take effect from April 1, 2026, and shall accordingly apply in relation to the tax year 2026-27 and subsequent tax years.

It also said that no tax is to be deducted at source in respect of interest on compensation amount awarded by a Motor Accidents Claims Tribunal to an individual.

“In order to provide relief to the individual and to alleviate the hardship caused due to accident, it is proposed that no tax shall be deducted at source in respect of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal to an individual,” the document said.

The amendment will take effect from April 1, 2026.

Finance Minister Nirmala Sitharaman on Monday (February 2, 2026) said the Union Budget for FY27 has focussed on investment as a priority tool for boosting consumption, and the trajectory of fiscal deficit shows that the government’s priority is growth.

Interacting with the media after the 2026-27 Budget presentation, Ms. Sitharaman also the volatility in gold prices is due to global uncertainty, and many central banks are investing in gold.

“It also shows that investors do not have confidence in any one particular currency. and hence the rush to buy gold,” Ms. Sitharaman said.

Talking about hike in securities transaction tax (STT) on F&O trades, the minister said it is a “sort of deterrence so that people do not go headlong in speculative” derivative trading.

Pocket-size politics: Budget 2026 in cartoons

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

Illustration: Soumyadip Sinha

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The Budget has proposed an increase in STT on futures contracts to 0.05% from 0.02%. STT on options premium and exercise of options are proposed to be raised to 0.15% from the present rate of 0.1% and 0.125%, respectively.

According to studies by SEBI, over 90% of retail investors’ trades in the F&O segment lead to losses, and the capital markets regulator has also taken steps to reduce volumes in the past.

“We have only touched the F&O trade which is highly speculative. I have received calls from many parents saying their children are severely losing money, and also seeking government intervention. The STT hike in F&O will act as a deterrence so that people do not go headlong with that,” Ms. Sitharaman said.

Continuing on the path of fiscal consolidation, the Budget has pegged fiscal deficit at 4.3% of GDP for the next fiscal year, as against 4.4% for the financial year ending March 2026.

Ms. Sitharaman said the fiscal deficit target has to depend on each year’s economic situation and in the past the government has pegged fiscal deficit a couple of basis points lower than the previous fiscal year.

This fiscal with the “government’s priority being growth, I am comfortable with 4.3% deficit target. We will see how it goes,” Ms. Sitharaman said.

She also said the pace of disinvestment and asset monetisation will continue. The government will encourage more disinvestment of public sector companies. IDBI Bank strategic disinvestment on track, pace of PSU stake sale to set direction of non-tax revenues, Ms. Sitharaman said.

In October 2022, the government, together with LIC, had invited EoI (Expression of Interest) from investors for privatising IDBI Bank by selling a total of 60.72% stake. This includes a 30.48% stake of Government of India and 30.24% of LIC.

DIPAM, in January 2023, received multiple EoIs for IDBI Bank. The prospective buyers of IDBI Bank have already been granted security clearance by the Ministry of Home Affairs and cleared fit and proper after evaluation by the Reserve Bank of India.

Ms. Sitharaman also expressed confidence that the recent higher private consumption, which was driven by GST rate cut and hike in Income Tax exemption limit in FY26 Budget, will sustain in coming months.

Union Finance Minister Nirmala Sitharaman, on Sunday (February 1, 2026), interacted with 30 university students who witnessed the session live in Parliament from the Lok Sabha gallery during the presentation of the Union Budget 2026-27.

She described the interaction as a departure from the usual practice of giving interviews to newspapers and television studios after the Budget presentation. Speaking at the Youth Dialogue on Budget 2026, Ms. Sitharaman said the idea came from her team, who suggested taking a different approach this time.

“This time my team thought of doing something out of the ordinary, saying, ‘You go after presenting the budget to each one of the studios or each one of the newspapers and give them inter…’” she said.

Also Read | A budget for difficult times

She shared that they devised the idea of inviting college students to Parliament, asking the attendees to share their experience.

“Therefore, they thought that they would get in touch with universities and come with a group of students with whom they can do this interaction, and that’s how this has worked out… I would certainly like to know from you what the experience of sitting in the parliament and listening to a budget was like,” she said.

Ms. Sitharaman also spoke about the efforts that are being made to ensure a “better India” for students while drawing a contrast with the India she grew up in.

“Every now and then, I can tell you what the country I was born in is, what the country I was brought up in is, and what this country is where I am living now. But that India, I wouldn’t want any of you all to remember. That’s not the India we want anymore in the future for anybody. We want a better India,” Ms. Sitharaman said.

Clarifying that she does not think that everything in the past can be perceived as negative, the Finance Minister added, “I’m not saying everything which happened in the past is bad, but because of the way in which economies grew after coming out of imperialism, our pace of growth, our type of growth, and our type of governance made it delayed. Everything was delayed.”

While acknowledging the strains created by the external global environment, Union Finance Minister Nirmala Sitharaman on Sunday (February 1, 2026) presented Budget 2026, with the aim to increase productivity across sectors and ensuring employment generation.

Presenting her record ninth consecutive Union Budget, Ms. Sitharaman said India must remain deeply integrated with global markets, exporting more and attracting stable long-term investment. The Budget also announced several infrastructure projects, including some that would benefit the poll-bound States of Tamil Nadu, Odisha, West Bengal, and Andhra Pradesh.

The Lok Sabha on Friday (December 5, 2025) passed a Bill which would levy a special cess on pan masala and use the fund for improving public health and strengthening national security. The ‘Health Security se National Security Cess Bill’, 2025, will introduce a new cess that replaces the existing Compensation Cess under the GST framework.

Union Finance Minister Nirmala Sitharaman said, “The cess will be shared with the States, as public health is a State subject.”

Replying to the debate on the Bill before it was passed by a voice vote, Ms. Sitharaman said, “Pan masala will be taxed at the maximum 40% rate under Goods and Services Tax (GST) based on its consumption, and there will be no impact of this cess on GST revenues.”

The primary intent behind the newly introduced Health Security (National Cess) Bill, 2025, is to levy a tax specifically on the production capacity of pan masala, a category the government says cannot be effectively brought under the conventional excisable regime, the Finance Minister had clarified on Thursday (December 4, 2025).

On Friday (December 4), she said the Bill intended to augment the resources for meeting expenditure on national security and for public health by levying a cess on the machines installed or other processes undertaken to manufacture pan masala and similar goods.

The purpose of the Bill is to create a “dedicated and predictable resource stream” for two domains of national importance – health and national security– she said.

The proposed Health and National Security Cess, which will be over and above the GST, will be levied on the production capacity of machines in pan masala manufacturing factories. Initially, the Bill applies to pan masala; however, the government may notify to extend the cess to other goods, if necessary.

Ms. Sitharaman added that the cess as a percentage of gross total revenue was 6.1% in the current fiscal, lower than 7% between 2010 to 2014.