Budget 2026: KPMG pre-Budget survey flags tax simplification, incentives, litigation relief as key demands

Ahead of the Union Budget 2026 and the rollout of the New Income Tax Act from April 1, 2026, KPMG in India’s Pre-Budget Survey 2026 highlights industry expectations centred on tax certainty, simplification and dispute resolution. The survey, conducted to gauge sentiment across sectors, underlines the view that while recent reforms have improved the tax framework, significant gaps remain that Budget 2026 could address.

Tax incentives

A key demand emerging from the survey is the revival of tax incentives to support investment and innovation. With several income-tax incentives having expired or approaching sunset, 50% of respondents favoured targeted, sector-specific incentives, while 34% supported the reintroduction of the concessional 15% tax rate for manufacturing units. The findings suggest that industry is seeking focused policy interventions rather than broad-based tax relief to strengthen India’s manufacturing and export competitiveness.

New Income Tax Act

On the New Income Tax Act, respondents broadly welcomed the move towards a simplified and more concise law but stressed the need for further rationalisation. The survey identified TDS and TCS compliance as the top area requiring reform, with 67% of respondents calling for consolidation of rate categories and streamlined processes. The assessment and litigation process was flagged by 62%, while 50% highlighted the need for a clearer and more consistent capital gains tax regime, indicating that procedural complexity continues to be a major pain point.

Old vs New Tax Regime

Another prominent theme is relief for salaried taxpayers. As the old tax regime is gradually phased out, 73% of respondents favoured a significant increase in the standard deduction, currently pegged at ₹75,000. Industry participants argued that enhancing the deduction under the new regime would improve fairness for salaried individuals and boost consumption amid rising living costs.

Income tax appeals

The survey also highlights mounting concern over the pendency of income-tax appeals, particularly at the Commissioner of Income-tax (Appeals) level, where more than 90% of cases are stuck. About 52% of respondents called for statutory timelines for mandatory disposal of appeals, while others supported the introduction of alternate dispute resolution mechanisms or a one-time dispute settlement scheme. The findings underscore the need for Budget 2026 to address litigation bottlenecks to improve ease of doing business.

IFSC structures

With the International Financial Services Centre completing a decade, a majority of respondents sought safe harbour provisions for IFSC structures to provide long-term certainty to global investors. Only a minority favoured maintaining the status quo, while others supported a gradual sunset of tax exemptions, reflecting a preference for policy clarity over abrupt withdrawal of benefits.

Transfer pricing rules

Transfer pricing rules also came under scrutiny. A large majority of respondents said transfer pricing safe harbour regulations need a revamp, particularly with respect to margins and thresholds. In addition, strong support was expressed for introducing a minimum threshold for applicability of transfer pricing provisions and raising the documentation threshold to reduce compliance burden on smaller taxpayers.

On the indirect tax front, the survey flagged operational challenges under GST. A significant majority supported a review of the Invoice Management System to reduce mismatches in credit notes and prevent unjust increases in tax liability, pointing to the need for technology-led fixes in compliance systems.

Overall, the survey suggests that expectations from Union Budget 2026 go beyond tax rate changes. Industry is seeking a tax framework anchored in simplicity, predictability and faster dispute resolution, as the New Income Tax Act ushers in the next phase of India’s tax reforms.