Stakeholders seek further tax reforms, higher standard deduction in Budget

With many income tax incentives already expired or approaching sunset, 34% of respondents said they expected the government to bring back a manufacturing-linked lower tax rate regime

An increase in the standard deduction, further simplification and rationalisation of income tax law, and enhancements to the GST invoice management system were among the key items stakeholders expect from the upcoming Budget 2026–27, KPMG India’s pre-Budget survey 2026 released on Tuesday showed.

 

With many income tax incentives already expired or approaching sunset, 34 per cent of respondents said they expected the government to bring back a manufacturing-linked lower tax rate regime. Nearly 50 per cent said that the government should focus on targeted sector-specific incentives.

 

The KPMG survey found that a majority — 51 per cent of respondents — were seeking a safe harbour provision for International Financial Services Centre (IFSC) structures to provide long-term clarity.

 

Seventy-one per cent of respondents called for a revamp of the safe harbour rules, especially from the perspective of margins and thresholds prescribed under the regime for different categories of business.

 

Three-fourths of respondents surveyed said that the government should introduce a minimum threshold for the applicability of transfer pricing provisions and increase the documentation threshold from Rs 1 crore to Rs 5 crore.

 

Seventy-three per cent of those taking part in the survey said that the government should significantly enhance the standard deduction under the new tax regime for salaried individuals, which is currently at Rs 75,000.

 

“The increase in slab rates for individuals in the last Budget, along with the recent reduction in GST rates, has enhanced disposable incomes and consequently driven consumption and spending. However, our pre-Budget survey indicates that stakeholders continue to look forward to further reforms and tax incentives,” Sunil Badala, partner and national head of tax, KPMG in India, said.

 

Consolidation of rate categories under TDS and TCS compliance, assessment and litigation processes, followed by the capital gains taxation regime, were the top three areas identified by the survey that require further attention and rationalisation.

 

A timeline for mandatory disposal of appeals to address the significant pendency of cases at the commissioner of income tax level was sought by 52 per cent of respondents.

 

Half of those surveyed said that the mechanism for resolving disputes amicably between taxpayers and the tax department was not meeting its objective.

 

Over 100 respondents, including C-suite leaders and senior management from diverse sectors such as financial services, technology, life sciences, pharmaceuticals and healthcare, and consumer markets, took part in the KPMG survey.