In a report released ahead of the Union Budget 2026, KPMG has outlined a set of key expectations, urging the government to consider tax relief measures to ease the financial burden on salaried individuals and homeowners, and taxpayers while also seeking greater clarity on emerging areas such as the taxation of electric vehicle (EV) perquisites. 

In its pre-Budget note, the KPMG said the government should consider enhancing the standard deduction for salaried employees to ₹1 lakh to help offset inflation and rising living costs. At present, the standard deduction stands at ₹50,000 under the old tax regime and ₹75,000 under the new tax regime. An increase, KPMG said, would provide meaningful relief to middle-income taxpayers amid higher household expenses. 

KPMG flags absence of housing loan interest deductions under the new tax regime

KPMG also flagged the absence of housing loan interest deductions under the new tax regime as a key concern. Under Section 202 of the Income-tax Act, 2025 (corresponding to Section 115BAC of the Income-tax Act, 1961), taxpayers opting for the new regime cannot offset housing loan interest against salary income, even for self-occupied properties. Given the rising burden of home loan repayments and the government’s broader objective of promoting home ownership, KPMG recommended allowing interest deduction on self-occupied property under the new tax regime as well. 

Another key recommendation relates to timelines for filing revised or belated income tax returns. Currently, such returns for any financial year must be filed by December 31 following the end of that year. KPMG noted that this deadline poses challenges for individuals with cross-border investments or income, as tax filings in other jurisdictions are often finalised much later. The firm cited the example of U.S. citizens who may be required to report global income in India before their overseas tax returns are completed. Extending the deadline, it said, would reduce the risk of under-reporting or over-reporting of income. 

KPMG also sought clarity on the valuation of perquisites for employer-provided electric vehicles. At present, perquisite valuation is linked to engine capacity, a metric not applicable to EVs. With companies increasingly encouraging EV adoption as part of ESG initiatives, the firm recommended introducing separate and clear valuation rules for EV-related perquisites.