Budget 2026 signals shift to compliance-driven tax regime: Grant Thorton analysis
Budget 2026 signals shift to compliance-driven tax regime: Grant Thorton analysis
Budget 2026 introduces a compliance-focused tax regime, shifting from criminal penalties to voluntary compliance. Key measures include decriminalizing minor tax offences, rationalizing penalties, and introducing the FAST-DS scheme for foreign asset disclosure. The Budget also clarifies tax exemptions on Sovereign Gold Bonds and revises corporate tax frameworks to enhance efficiency and reduce litigation.
The report notes the Union Budget “marks a clear shift from criminalisation to a compliance-oriented tax regime by decriminalising minor tax offences and replacing them with fines”
The Budget 2026 marks a clear change in India’s tax approach, moving away from criminal penalties and towards voluntary compliance, according to a detailed analysis of the tax proposals by Grant Thorton. The Budget focuses on easing procedures, reducing litigation, and giving taxpayers more certainty while widening the tax base.
The report notes that the Budget “marks a clear shift from criminalisation to a compliance-oriented tax regime by decriminalising minor tax offences and replacing them with fines”. As part of this approach, the government has proposed rationalising penalties into fees and limiting prosecution only to serious cases. For smaller defaults, monetary penalties will replace jail terms.
In the Budget, one of the key announcements is the Foreign Assets of Small Taxpayers – Disclosure Scheme (FAST-DS), 2026, a one-time six-month window for disclosure of foreign assets. The scheme offers immunity from prosecution for small taxpayers, with the report highlighting that it provides “a one-time disclosure window for foreign non-immovable assets, offering immunity from prosecution for non-disclosures below ₹20 lakh”. This move is expected to encourage voluntary disclosures and bring unreported assets into the tax net.
For individuals, the Budget has clarified tax exemptions on Sovereign Gold Bonds, ensuring uniform application across all issuances, provided the bonds are held until maturity. The Budget has also extended timelines for filing revised returns, allowing taxpayers more flexibility to correct errors by paying a nominal fee.
On the corporate side, the government has rationalised the buyback tax framework. The report states that “consideration received on buy-back shall be chargeable to tax under the head ‘Capital gains’ instead of being treated as dividend income” for non-promoter shareholders . This is likely to make buybacks more tax-efficient for investors. At the same time, significant changes have been proposed in Minimum Alternate Tax (MAT) rules, with different treatments under the old and new tax regimes.
The Budget also aims to reduce long-running tax disputes. Measures such as faster timelines for advance pricing agreements, safe harbour rules for the IT sector, and the merger of assessment and penalty proceedings are meant to simplify enforcement. According to the report, these steps are designed to “resolve disputes early, reduce avoidable litigation, and provide taxpayers with greater certainty without prolonged proceedings”.