Arunachal Pradesh Deputy Chief Minister Chowna Mein has presented the state's infrastructure priorities to the Centre during the pre-budget consultation for Union Budget 2026-27, emphasizing the state's commitment to fiscal discipline while seeking support for critical development projects.

Pre-Budget Consultation Details

The high-level meeting was chaired by Union Finance and Corporate Affairs Minister Nirmala Sitharaman in New Delhi on Saturday. The consultation brought together governors, chief ministers, deputy chief ministers, and finance ministers of states and union territories, along with senior finance ministry officials to discuss priorities, fiscal challenges, and policy inputs for the forthcoming Union Budget.

State's Fiscal Performance

During the consultation, Mein highlighted Arunachal Pradesh's strong fiscal management record despite facing remoteness and long-standing developmental challenges. The state has demonstrated steady progress in recent years while maintaining strict fiscal discipline in accordance with the Arunachal Pradesh Fiscal Responsibility and Budget Management Act, 2006.

Priority Infrastructure Projects

The Deputy Chief Minister presented several key infrastructure requirements to the Centre, focusing on projects critical for the state's development and strategic importance.

Water Supply and Urban Infrastructure

Mein emphasized the urgent need for augmentation of water supply and drainage systems in Itanagar and other urban areas across the state. This infrastructure development is essential for supporting the growing urban population and improving quality of life.

Strategic Railway Connectivity

A major highlight of the state's presentation was the strategic Rupai to Wakro Parashuram Kund railway line project. Mein outlined the multiple benefits this railway project would deliver:

• Significantly improved connectivity for the region
• Strengthened border infrastructure
• Enhanced religious tourism opportunities in Arunachal Pradesh

The Deputy Chief Minister noted that the railway project has already received clearance from the Ministry of Defence, indicating progress in the approval process.

Development Challenges and Support Requirements

Mein drew attention to the state's limited access to externally aided projects, which constrains development opportunities. He emphasized the critical need for continued central support to bridge resource gaps and maintain the current development momentum across various sectors.

The state government's approach focuses on maintaining fiscal prudence while ensuring close coordination with the Centre to accelerate inclusive and sustainable development throughout Arunachal Pradesh.

Government's Commitment

Reiterating the state's development philosophy, Mein assured that Arunachal Pradesh remains committed to responsible fiscal management and collaborative governance. The state continues to prioritize sustainable development initiatives while working closely with central authorities to address infrastructure deficits and development challenges.

Tax policy experts have presented comprehensive recommendations for Budget 2026 to enhance India's mergers and acquisitions environment, particularly with the Income-tax Act, 2025 scheduled for implementation from April 1, 2026. The suggestions aim to address existing regulatory gaps and improve the ease of doing business for M&A transactions.

Fast-Track Demerger Tax Neutrality

A primary recommendation involves extending tax neutrality to fast-track demergers under Section 233 of the Companies Act, 2013. Currently, the Income-tax Act, 2025 provides tax neutrality only to NCLT-approved demergers under Sections 230 to 232, excluding fast-track demergers that enable small or closely held companies to undertake demergers without court approval.

The finance ministry's rationale for excluding fast-track demergers centers on concerns about potential valuation manipulation without court oversight. However, experts argue this approach contradicts the ease of doing business agenda, forcing genuine taxpayers to choose between transaction efficiency and tax benefits.

Contingent Consideration Clarity

Experts emphasize the need for clear taxation guidelines on earn-out, profit-linked, or contingent consideration arrangements that have become increasingly common in M&A transactions. These arrangements tie part of the sale consideration to achieving specific profitability or financial milestones.

The current legal framework lacks clarity on:

• Taxability of contingent payments
• Timing of taxation for such arrangements
• Treatment of milestone-based considerations

Foreign Company Merger Anomalies

The recommendations address existing inconsistencies in foreign company merger taxation. While foreign companies enjoy capital gains tax exemptions on direct or indirect share transfers during mergers with other foreign companies, shareholders of the amalgamating company face potential capital gains liability on share swaps.

This creates an anomaly compared to domestic mergers, which provide exemptions at both company and shareholder levels.

Capital Gains Tax Rate Concerns

The recent capital gains tax regime rationalization introduced higher long-term capital gains tax rates, which experts suggest adversely impacts investor returns and exit efficiency. The increased rates potentially drive investors toward jurisdictions with more favorable tax regimes.

Key concerns include:

• Reduced post-tax returns for investors
• Decreased competitiveness with other investment destinations
• Impact on foreign capital attraction

Experts recommend reducing capital gains tax rates, suggesting restoration of the earlier 10.00% rate to improve India's competitive position in attracting foreign investment.

Strategic Implementation Timeline

With the Income-tax Act, 2025 set for April 1, 2026 implementation, Budget 2026 represents the final opportunity to incorporate these amendments before the new framework takes effect. The recommendations aim to position India as a preferred destination for cross-border M&A activities while maintaining regulatory integrity and supporting corporate growth objectives.