Budget 2026: KPMG signals tax reform push as industry demands deductions, dispute resolution
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Industry leaders are urging the government to accelerate tax reforms ahead of the New Income Tax Act coming into effect in April 2026, according to KPMG in India’s pre-Budget survey. Among 103 respondents, 73% called for a significant increase in salaried standard deductions, signaling broad public demand for relief under the new regime.
Sector-specific incentives and R&D support
The survey highlighted a strong push for manufacturing-linked incentives, with 34% advocating a revival of tax benefits akin to the now-defunct 115BAB regime, while half sought targeted sector-specific perks to stimulate investment and innovation. Financial services topped the sectoral wish list at 17%, followed by technology and industrials, and automotive at 5%. Extensions of R&D weighted deductions also featured prominently, reflecting waning old incentives.
Compliance and litigation challenges
Compliance and litigation bottlenecks remain a key concern. Respondents cited TDS/TCS rate consolidation (67%), assessment delays (62%), and capital gains revisions (50%) as pressing issues. Over half of the participants demanded mandatory appeal disposal timelines at the CIT (Appeals) level, where nearly 90% of cases are pending. Additionally, 71% called for a revamp of transfer pricing safe harbours, while more than 75% backed raising the TP documentation threshold from ₹1 crore to ₹5 crore to ease burdens on smaller firms.
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IFSC, GST, and tech gaps
Other notable demands include policy stability for GIFT City’s IFSC, with 51% advocating against sunset clauses on exemptions, and reforms in GST’s Invoice Management System, criticized by 82% of respondents for mismatched credit notes. Tech adoption gaps were also flagged, with 40% of firms still relying on manual processes.
Budget signals for simplification and investment
KPMG leaders Akhilesh Tuteja and Sunil Badala pointed to these findings as signals for Budget 2026-27, emphasizing the need for simplification, export diversification, and sector-specific incentives to unlock capital expenditure. With Finance Minister Nirmala Sitharaman set to deliver the budget on February 1, market watchers will closely observe whether pending disputes, IFSC policy boosts, and tax relief measures for salaried individuals and businesses are addressed.