Kerala Chief Minister V D Satheesan on Friday announced a series of tax relief measures, amnesty schemes and revisions to vehicle taxes while presenting the revised state Budget in the Assembly, saying the steps are aimed at easing the burden on taxpayers, supporting businesses and improving revenue mobilisation.

The revised Budget estimates for 2026-27 project revenue receipts of ₹1,69,646.37 crore against revenue expenditure of ₹2,05,001.67 crore, resulting in a revenue deficit of ₹35,355.30 crore.

The Budget estimates capital expenditure (Net) at ₹19,651.41 crore, public debt (Net) at ₹52,364.13 crore, and an overall deficit of ₹41.23 crore. The government has also announced additional expenditure of ₹1,080.95 crore, taking the cumulative deficit at the end of the year to ₹1,504.63 crore.

 

One of the key tax relief announcements was the Flood Cess Arrears Settlement Scheme, 2026.

The chief minister, who holds finance portfolio, noted that although the one per cent Flood Cess levied on GST for Business-to-Customer (B2C) supplies between August 1, 2019 and July 31, 2021 had ended, substantial arrears remained unpaid.

To help businesses clear these dues, the government announced that taxpayers who pay the entire outstanding principal amount of Flood Cess will receive a complete waiver of interest and penalty.

The last date to settle arrears under the scheme is March 31, 2027.

The government also unveiled a Small Arrear Waiver Scheme, 2026 for pending dues under pre-GST tax laws.

Under the proposal, arrears involving tax amounts of more than ₹50,000 but not exceeding ₹2 lakh relating to assessment orders up to the 2017-18 financial year will be fully waived along with the related interest and penalty.

However, the concession will not apply to arrears linked to the sale of liquor under the Kerala General Sales Tax Act, 1963.

In the liquor sector, the Budget proposed fresh sales tax rates for low-strength alcoholic beverages under the Kerala General Sales Tax Act.

Products with 0.5 per cent to 10 per cent alcohol by volume (v/v) will attract 120 per cent sales tax, while those with more than 10 per cent and up to 20 per cent alcohol by volume will be taxed at 175 per cent.

The Budget also announced changes in motor vehicle taxation to support public transport and promote electric mobility.

Quarterly tax on All India Tourist Permit (AITP) buses has been sharply reduced, with the rate per seat cut from ₹2,000 to ₹900 and the rate per sleeper reduced from ₹3,000 to ₹1,500.

The government said the move is intended to encourage more AITP buses to register in Kerala and improve inter-state travel.

For trailer vehicles, the additional tax slab applicable to vehicles weighing above 20,000 kg has been removed, bringing them under the same tax structure as trailers above 15,000 kg.

Road tax on electric vehicles has also been revised. Vehicles priced up to ₹10 lakh will now attract 3 per cent tax instead of 5 per cent, while those costing between ₹15 lakh and ₹20 lakh will see the rate reduced from 8 per cent to 5 per cent.

Tax on electric vehicles priced above ₹40 lakh has been increased from 10 per cent to 15 per cent, while other slabs remain unchanged.

The government further enhanced the motor vehicle tax concession for differently-abled persons by increasing the eligible vehicle value limit from ₹7 lakh to ₹15 lakh.

An e-challan Amnesty Scheme was also announced, allowing citizens to settle pending traffic challans by paying 50 per cent of the challan amount.

In the Registration Department, the government proposed a One-Time Settlement Scheme to dispose of 1,46,355 undervaluation cases involving around ₹703 crore in deficit stamp duty dues accumulated between 1986 and 2023.

As a one-time measure, additional stamp duty will be waived in cases relating to the period up to March 31, 2010, where the amount determined in the final order is below ₹10,000.

The Budget also extended the existing 4 per cent concessional stamp duty available for eligible flats and apartments to Kerala Real Estate Regulatory Authority (K-RERA)-registered villas that comply with prescribed standards.

Additionally, if deficit stamp duty determined in an undervaluation case remains unpaid even after all appellate remedies are exhausted, and payment is not made within 60 days of the final order, interest at 1 per cent per month (12 per cent per annum) will be charged until payment. 
Kerala budget earmarks ₹50 crore for Gen-Z initiatives

Chief Minister V D Satheesan on Friday announced a Rs 50 crore initiative for Generation-Z, describing the digitally native generation as a key driver of Kerala’s future economy and innovation ecosystem.

 

Presenting his maiden budget in the Assembly, Satheesan said Generation-Z was among the forces rapidly transforming the world.

 

According to him, those born and raised in the digital age have technology as an integral part of their lives and are quick to adopt emerging technologies.

 

“Gen Z is the fastest demographic to adopt and utilise breakthroughs in fields such as Artificial Intelligence, Robotics, Data Science, Internet of Things (IoT), and Virtual Reality (VR). The creative abilities and technological excellence of the younger generation can be brought together to develop Kerala’s startups, innovation hubs, research centres and smart industries, while emphasising digital ethics, privacy protection, cyber security and core human values,” he said in the revised state Budget in the Assembly.

 

“By striving to develop technological solutions to complex problems and create systemic changes, this generation will become an important driving force of the future economy and industries. An amount of Rs 50 crore is allocated for this purpose,” he added.

 

The budget also announced a Malayalam AI Initiative with an allocation of Rs 10 crore.

 

“Kerala will launch a Malayalam AI Initiative — funding an open Malayalam dataset, free for all, and supporting the development of Malayalam AI models that innovators can take to market. An amount of Rs 10 crore is allocated for this,” Satheesan said.

 

The budget further proposed facilities for screening short films and documentaries by Gen-Z creators and for presenting contemporary dance and music performances at the proposed M T Vasudevan Nair Cultural Park in Kozhikode.