Amid rising global economic volatility, EY India has said the upcoming Union Budget 2026 will play a critical role in shaping India’s medium-term economic trajectory, with a strong focus on sustaining growth, enhancing tax certainty, and encouraging sector-specific investments. 

In its pre-Budget expectations, EY India said the government should adopt a forward-looking fiscal approach that balances discipline with growth ambitions, reinforces investor confidence, and catalyses private sector participation.  

EY calls for focus on tax certainty and compliance 

Sameer Gupta, National Tax Leader, EY India, said businesses are looking for a clear commitment to tax certainty and simplified compliance. “On the tax front, businesses look for a strong commitment to tax certainty and streamlined compliance processes,” he said. 

EY expects significant changes in the direct tax framework, particularly to ensure a smooth transition to the New Income Tax Act, 2025. It has called for detailed guidelines and FAQs to reduce confusion during the shift from the Income Tax Act, 1961, and to minimise litigation. 

It also stressed the need for policy predictability by avoiding frequent tax rate changes, saying a stable tax environment builds trust, improves compliance, and strengthens revenue collection. 

TDS reform and investment incentives 

EY has flagged TDS rationalisation as a key priority, noting that the current structure—covering 37 types of resident payments with rates ranging from 0.1% to 30%—often leads to disputes and cash-flow blockages. It suggested that Budget 2026 should outline a road map to reduce TDS rates to no more than three or four slabs and exempt B2B payments subject to GST, as such transactions are already captured in tax reporting systems. 

International tax clarity and decriminalisation 

EY stressed the need for clearer international tax rules, particularly around permanent establishment and profit attribution, to reduce litigation and improve predictability for foreign investors. It suggested an optional presumptive tax regime for select sectors such as turnkey projects, technical services, and digital businesses, in line with recommendations made by NITI Aayog in October 2025.  

Other expectations include rationalisation of safe harbour rules, easing transfer pricing compliance for non-resident entities without a permanent establishment, and implementation of NITI Aayog’s proposals to decriminalise income tax offences. 

 EY also called for a clear legal framework for virtual digital assets, including guidelines on loss treatment, to improve compliance and provide certainty to investors in the digital asset ecosystem.