As the countdown to the next Union Budget begins, discussions around tax reforms and policy clarity are gaining momentum, with industry voices flagging key areas that could shape India’s economic direction in the coming years.
The Union Budget 2026 is expected to be presented on 1 February 2026 by Finance Minister Nirmala Sitharaman. The Budget Session of Parliament will start on 28 January 2026 and continue until 2 April 2026, according to Union Minister Kiren Rijiju. Against this backdrop, EY India has outlined expectations focused on growth, tax certainty, and smoother compliance.
EY said the upcoming Budget will be critical in sustaining strong economic momentum, improving clarity in taxation, and encouraging targeted investments across sectors. The firm expects meaningful changes in the direct tax framework to reduce disputes and improve ease of compliance.
A key concern highlighted is the complexity of tax deducted at source provisions. EY noted that there are 37 different types of payments to residents, with TDS rates ranging from 0.1% to 30%. This often leads to disputes over classification, cash flow blockages due to delayed refunds, and added interest costs for the government.
To address this, EY recommended a clear roadmap to streamline the TDS structure, limiting it to no more than 3–4 rates. It also suggested exempting B2B payments that are subject to GST from TDS, as transaction details are already captured through Form 26AS/AIS.
On legislative reforms, EY stressed the need for smooth implementation of the New Income Tax Act 2025. The firm said detailed guidelines and FAQs should accompany the rollout to avoid confusion during the transition from the Income Tax Act, 1961, and to reduce litigation.
EY also proposed reintroducing accelerated depreciation as a focused fiscal incentive to boost manufacturing investment. It suggested that this benefit be included within the existing concessional corporate tax regime of 22%/15%, ensuring that higher depreciation does not trigger Minimum Alternate Tax.
In the context of global economic uncertainty and India’s manufacturing ambitions under initiatives like “Make in India”, EY said such measures could strengthen competitiveness, attract domestic and foreign investment, and support job creation.
The firm further underlined the need for tax certainty for foreign investors. It noted that the absence of clear rules on permanent establishment and profit attribution often leads to disputes, and said codified guidance would help reduce litigation and improve clarity.
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