ICAI suggests F&O reprieve, mandatory ITR on agri land over specified limit ahead of budget

The Institute of Chartered Accountants of India (ICAI) today called for "prudent" tax reforms in the union budget 2026-27, including exclusion of Futures and Options from presumptive income, and making ITR mandatory for persons holding more than specified acres of agricultural land. The institute has also called for increase in surcharge.

ICAI said its pre-budget recommendations to the Centre are aimed at facilitating ease of doing business and encouraging environmental sustainability.

The statutory tax body said its recommendations on direct taxes and international taxation encapsulate a spectrum of suggestions on tax policy and framework at the macro-level as well as specific-section wise suggestions aimed at mitigating litigation, reducing compliance burden, rationalisation of the provisions of income-tax law, preventing tax avoidance and improving tax collection.

“ICAI has always been at the forefront of nation building and continues to work closely with the Government as its trusted knowledge partner. Through our Pre-Budget Suggestions for 2026–27, we aim to support a tax ecosystem that promotes ease of doing business, drives sustainable growth and strengthens India’s journey towards a resilient and green economy,” said Charanjot Singh Nanda, President, ICAI.  

In its recommendations, ICAI has suggested that tax neutral status be extended to business reorganisation in LLPs, TDS on partners remuneration be rationalised and incentives be given for promoting green projects.

ICAI suggested five-point recommendations on the mitigating litigation. These included decriminalisation of certain prosecution provisions, removal of dual penalty for the same default, and processing of returns to be limited to addressing arithmetical errors and prima facie incorrect claims.

ICAI also suggested measures to ensure prevention of tax avoidance and improving tax collection.  ICAI said measures like exclusion of F&O trading and speculation business from the scope of presumptive income and joint taxation of married couples will enhance tax avoidance and improve collection. Other measures on this front suggested by the institute include mandatory return filing by persons owning more than specified acres of agricultural land.

On rationalisation of the provisions of income-tax law, the institute called for an increase in surcharge threshold and provision of deduction for medical insurance premium paid and expenditure on maintenance of dependent disabled under the default tax regime for individuals.

A surcharge is an additional tax imposed with a view to ensure that high income groups contribute more to tax kitty, thereby bringing equity in the tax collection system. Tax surcharge for the individuals ranges from 10% to 37% depending on the income bracket.

ICAI has also sought clarification of applicable rate of surcharge for calculation of Maximum Marginal Rate (MMR).

“It is noteworthy that the ICAI’s suggestions on Comprehensive review of the Income-tax Act, 1961—submitted last year—and its Memorandum of Suggestions on the Income-tax Bill, 2025—submitted in April this year—were positively received, with over 100 suggestions considered in the Income-tax Act, 2025, which comes into force on 1st April, 2026,” said ICAI.