The Budget has delivered a googly—the retrospective tax (Excluding the retrospective tax, Budget 2026 is a very good example of good policy-making. Major policies were announced before the Budget. Income tax reform was announced last year, GST re..., Pg12

Key Highlights:

• Budget 2026 introduced a new retrospective tax of 12.5% on capital gains from Sovereign Gold Bonds (SGBs) purchased after April 2026.
• SGBs were introduced in 2015-16 to reduce physical gold imports and were discontinued in 2024.
• The government expects to collect approximately ₹200 crore annually from this new tax, which is about 0.005% of the total tax receipts in 2025-26.
• The author argues that this retrospective tax negatively impacts investor confidence and portrays the government as greedy and unfair.

Detailed Insights:

• The introduction of SGBs helped stabilize the rupee by lowering physical gold imports and improving the current account balance.
• The government benefited by borrowing from investors at a lower rate of 2.5% through SGBs, compared to the market rate of 7%.
• The author advocates for an open and collaborative approach to budget preparation, moving away from the current secret decision-making process.
• A key concern for the Indian economy is the decline in private investment, with its share in GDP falling by about 10 percentage points from its peak of 30%.
• The author attributes the decline in private investment to the UPA's retrospective tax action in 2012 and the BJP's Model Bilateral Investment Treaty of 2015.

Key Concepts Involved:

• Retrospective Tax: A tax imposed on transactions or events that occurred in the past.
• Sovereign Gold Bonds (SGBs): Government securities denominated in grams of gold, offering an alternative to holding physical gold.
• Private Investment: Investments made by private companies and individuals in productive assets.