Kerala Chief Minister VD Satheesan, who also holds the finance portfolio, on Friday (June 19) presented the revised state Budget for 2026-27, unveiling a package of tax relief measures, vehicle-tax changes to promote electric mobility, targeted support for Gen‑Z startups and some interesting initiatives for Artificial Intelligence (AI). The package aims to ease the tax burden on households and businesses, mobilise revenue through one‑time settlements, and accelerate the state’s technology and innovation agenda.
Tax reliefs, amnesty schemes and revenue picture
CM Satheesan announced several taxpayer concessions and amnesty schemes designed to clear long-pending dues and provide relief to small taxpayers. The revised Budget estimates revenue receipts at Rs 1,69,646.37 crore against revenue expenditure of Rs 2,05,001.67 crore, leaving a revenue deficit of Rs 35,355.30 crore. Capital expenditure (net) is estimated at Rs 19,651.41 crore, public debt (net) at Rs 52,364.13 crore, and an overall deficit of Rs 41.23 crore. Additional expenditure of Rs 1,080.95 crore brings the cumulative deficit to Rs 1,504.63 crore for the year.
On tax reliefs and amnesty schemes, the Chief Minister said these steps would “ease the burden on taxpayers and help businesses clear pendency while improving revenue mobilisation.”
Here are some key measures:
Flood Cess Arrears Settlement Scheme, 2026: Taxpayers who clear the principal outstanding amount of the 1% Flood Cess (levied on B2C supplies between 1 Aug 2019 and 31 Jul 2021) will receive a full waiver of interest and penalties. Last date for settlement: 31 March 2027.
Small Arrear Waiver Scheme, 2026: Arrears under pre‑GST laws between Rs 50,000 and Rs 2 lakh relating to assessment orders up to 2017‑18 will be fully waived, including interest and penalties. Exemption excludes arrears tied to liquor sales under the Kerala General Sales Tax Act, 1963.
One‑Time Settlement for undervaluation cases: The Registration Department will move to resolve 1,46,355 undervaluation cases (approx. Rs 703 crore deficit stamp duty). Additional stamp duty will be waived for cases up to 31 Mar 2010 where final order amounts are under Rs 10,000; unresolved deficit stamp duty after appellate remedies will attract interest at 1% per month until payment.
Vehicle taxes and incentives for Electric Vehicle
The Budget revises motor vehicle taxes to support public transport and encourage electric vehicles while also tightening some high-end EV slabs.
Electric vehicles: Road tax for EVs priced up to Rs 10 lakh is reduced from 5% to 3%; vehicles priced between Rs 15 lakh and Rs 20 lakh are taxed at 5% (down from 8%). EVs above Rs 40 lakh will face an increased tax of 15% (up from 10%). Other slabs remain unchanged.
All India Tourist Permit (AITP) buses: Quarterly tax per seat cut from Rs 2,000 to Rs 900; per sleeper reduced from Rs 3,000 to Rs 1,500 to encourage AITP registrations in Kerala.
Trailers: The additional tax slab for vehicles over 20,000 kg removed; these will now fall under the same structure as trailers over 15,000 kg.
Differently‑abled concessions: Motor vehicle tax exemption threshold for differently‑abled persons raised from Rs 7 lakh to Rs 15 lakh.
E‑challan Amnesty: Citizens can settle pending traffic challans by paying 50% of the challan amount.
Revenue measures for liquor and stamp duty
Liquor taxation: Fresh sales tax slabs under the Kerala General Sales Tax Act: beverages with 0.5–10% alcohol by volume (v/v) taxed at 120%; beverages over 10% up to 20% v/v taxed at 175%.
Concessional stamp duty: Existing 4% concessional stamp duty for eligible flats/apartments extended to K‑RERA‑registered villas that meet prescribed standards.
Knowledge valley, higher education and Gen‑Z startups
The Budget sets out an ambitious higher‑education push to position Kerala as a global education hub under the “Knowledge Valley” plan. Special legislation and Private University Bill amendments will be enacted to attract foreign universities and collaborations; Rs 100 crore allocated for the initiative.
A special data‑driven “Invest Kerala” cell and an Investment Advisory Council will be created to draw investors and spur industrial growth. The government will launch 10,000 Micro, Small and Medium Enterprises (MSMEs) across the state and set up a Global Job Watch Tower to improve employment and labour‑market planning.
On technology and Gen‑Z initiatives, Satheesan said, “Malayalam must not be left behind in the era of Artificial Intelligence,” and described Gen‑Z as “an important driving force of the future economy and industries.”
Gen‑Z and AI focus:
Gen‑Z startup fund: Rs 50 crore dedicated to support Generation‑Z startups, innovation hubs and research centres, aimed at leveraging youth expertise in AI, robotics, data science, IoT and VR.
Malayalam AI initiative: Rs 10 crore allocated to build an open Malayalam dataset and promote indigenous AI models, part of wider efforts after Kerala created a dedicated AI ministry. Satheesan emphasised that “Malayalam must not be left behind in the era of Artificial Intelligence.”
Mission Geo Keralam and geospatial governance
Under ‘Mission Geo Keralam,’ the state will mainstream spatial governance by transforming the Kerala State Remote Sensing and Environment Centre (KSREC) into the Kerala Geospatial Intelligence Platform (KGIS). The project will use AI and real‑time analytics for governance, create a corpus fund, and support geospatial decision‑making across departments.
Kerala’s financial challenges and the Budget 2026 response
Kerala is grappling with significant fiscal pressures arising from a high debt burden, rising welfare expenditure, pension liabilities and what the state government has repeatedly described as constraints on borrowing imposed under central fiscal rules. These factors have limited the state’s ability to fund large-scale development projects while continuing its extensive social welfare commitments. The new Kerala Budget, presented by CM Satheesan seeks to address these challenges by balancing revenue generation with targeted investments in growth-oriented sectors.
Measures such as introducing a new tax slab for low-alcohol beverages, rationalising certain taxes, and promoting economic activity through incentives like reduced road tax on electric vehicles aim to boost revenue and encourage sustainable development. At the same time, the budget allocates substantial funds for welfare and infrastructure initiatives, including Rs 600 crore for the Indira free travel scheme, investments in technology-driven governance and Rs 200 crore to develop the state’s aviation hub. The overall strategy reflects an effort to stimulate economic growth, attract investment, improve mobility and infrastructure, and expand the tax base while maintaining key social welfare programmes despite ongoing fiscal constraints.
Technology, research and startups
Support for space sector startups: Rs 5 crore allocated to back private space startups.
Research Park: A research park will be set up by bringing together leading research and industrial institutions.
Cyberpark Kozhikode upgrade: Plans to elevate Kozhikode Cyberpark to the level of Infopark Kochi and Technopark Thiruvananthapuram to decentralise tech growth.
Aviation, maritime and infrastructure push
Mission Samudra: A Rs 400 crore maritime initiative to transform Kerala into a port‑led economy over five years, leveraging its 600‑km coastline, ports and inland waterways. The plan includes accelerating land acquisition and connectivity projects (Balaramapuram‑Vizhinjam rail line, Vizhinjam‑Navayikulam Outer Ring Road), developing stuffing centres and dry ports, green bunkering at Vizhinjam, shipbuilding and repair hubs, and a Keralam Maritime Policy to promote port‑based industries and maritime tourism. Rs 50 crore is earmarked for the first phase. On Mission Samudra, the CM said the state would “transform Keralam into a major force on the global maritime map within five years.”
Aviation Logistics Hub: Rs 200 crore allocated to develop an aviation‑logistics hub centred on the state’s four airports.
Light metro: Rs 20 crore for preliminary work on light metro projects in Thiruvananthapuram and Kozhikode.
Land reforms and industrial infrastructure
Satheesan also announced Land Reforms 2.0 — a comprehensive land management policy and a Land Bank to mobilise surplus government and PSU land. The government will review outdated statutes, expedite land‑conversion procedures for commercial projects, and introduce land‑pooling frameworks. Agencies like KINFRA and INKEL will be empowered to manage acquisition and infrastructure tasks.
Sports, culture and tourism investments
Sports: A world‑class football stadium in Malabar allocated Rs 50 crore under a Vision 2036 to nurture athletes for the 2036 Olympics; an international stadium planned at Chelad, near Kothamangalam.
Film city and cultural parks: Rs 100 crore for the JC Daniel International Film City‑Chitranagaram in Kochi, Rs 50 crore for the MT Vasudevan Nair Cultural Park in Kozhikode, and various cultural projects including a music academy in memory of ghazal singer Umbayi.
Other relevant allocations: Rs 10 crore for Thekkinkadu Maidan renovation; Rs 1 crore for the Aranmula Kannadi exhibition and training centre; Rs 1 crore for a Salim Kumar memorial; Rs 1 crore for Sree Narayana Guru cultural centre in Delhi; and support for Palliyodams and Ulloor Memorial Library.
Agriculture and social schemes
Indira guarantee: Rs 600 crore allocated for free travel on KSRTC buses for women; Rs 10 crore toward an Indira insurance guarantee providing Rs 25 lakh cover per family.
Rubber MSP: The minimum support price for rubber was raised from Rs 200 to Rs 250.
Wayanad Tribal University: Rs 50 crore allocated.
Other fiscal and administrative notes
The Budget announces administrative measures to improve revenue mobilisation and governance. These include stronger enforcement on stamp duty collections (1% monthly interest on unpaid deficit stamp duties after final orders) and expanded concessions to boost home ownership through concessional stamp duty for qualifying properties.