The Finance Bill is a legislative proposal, a type of Bill, introduced annually in the Lok Sabha immediately after the presentation of the Union Budget to give legal effect to the Central Government's financial proposals for the upcoming financial year. Its origin is tied to the constitutional requirement that no tax shall be levied or collected except by authority of law, as stated in Article 265 of the Constitution of India. The Bill solves the problem of legally implementing the tax changes—such as the imposition, abolition, remission, alteration, or regulation of any tax—proposed by the Finance Minister in the Budget.
The Bill is primarily a Money Bill under Article 110(1)(a) of the Constitution because it deals with taxation. This classification dictates how it works: it can only be introduced in the Lok Sabha and requires the President's recommendation for introduction. The Rajya Sabha can only make recommendations and must return the Bill within 14 days; it cannot reject it. Once passed by Parliament and assented to by the President, the Finance Bill becomes the Finance Act for that year. It connects to and amends various existing laws, such as the Income Tax Act, 1961, and the Customs Act, 1962.
A significant recent change is the introduction of the Income-tax Act, 2025 (ITA 2025), which came into force on April 1, 2026, and repealed the Income-tax Act, 1961. The Finance Bill, 2026, proposed amendments to both the existing ITA 1961 and the new ITA 2025 to facilitate a smooth transition, while the core function of the Finance Bill—to enact the government's annual tax proposals—stayed the same.