As Union Budget 2026 approaches, tax professionals across India are sending a clear message to the government: prioritise stability and administrative efficiency over dramatic policy changes. With the new Income-tax Act 2025 scheduled to take effect from April 1, 2026, experts are advocating for a measured approach that allows recent reforms to settle while addressing longstanding compliance challenges.

Call for Policy Stability

Anil Harish, Partner at D.M. Harish & Co., emphasises that the most meaningful reform would be the absence of reform itself. He warns that amending the Income-tax Act 2025 before it comes into force would signal policy instability. According to Harish, the new Act primarily streamlines language and structure without significantly departing from the 1961 framework.

Administrative Reforms Take Priority

Ankit Rajgarhia, Designate Partner at Bahuguna Law Associates, notes that professionals are urging the finance minister to prioritise administrative fixes over headline-grabbing tax cuts. The focus areas include reducing TDS rates, simplifying withholding compliance, and accelerating dispute resolution to address the mounting backlog of income-tax appeals. For salaried taxpayers, key demands include higher standard deductions and clearer rules within the new tax regime.

Corporate and Investment Concerns

On the corporate front, manufacturing companies are seeking the reintroduction of concessional tax regimes to encourage new investments and job creation, according to Kunal Savani, Partner at Cyril Amarchand Mangaldas. He highlights significant gaps in digital economy taxation, particularly for crypto assets and derivative-based transactions, where the current framework imposes 30% tax on gains without allowing expense deductions or loss set-offs.

NRI Compliance Bottlenecks

Non-resident Indians face specific challenges that require targeted solutions. Aarjav Jain, Executive Director at Dinesh Aarjav & Associates, highlights growing digital bottlenecks in income tax compliance. Aadhaar-linked OTP requirements and net banking access failures have prevented many NRIs from completing return verification or receiving refunds despite timely filings.

Key NRI Issues:

• Double taxation of foreign retirement accounts
• Cumbersome TDS procedures on property sales
• Foreign tax credit mismatches due to differing financial years
• Digital verification challenges

GST and Indirect Tax Expectations

Indirect tax experts are closely monitoring GST reforms. Jitendra Patel, Partner – Indirect Tax at N A Shah Associates LLP, notes that while GST 2.0 aims to simplify rate structures, compliance remains demanding for small businesses. Priority areas include stable return formats, resolution of legacy Input Tax Credit mismatches, clarity on real estate GST issues, and faster operationalisation of the GST Appellate Tribunal.

Senior Citizens and Social Security

CA Pretti Malhotra of Wise Finserv addresses the lack of meaningful social security for retirees dependent on interest income. She advocates for a separate lower tax bracket for senior citizens without pensions, clarity on National Pension System taxation, rationalisation of notional rent provisions, and expedited refund processes.

Transition and Implementation Challenges

CA Suresh Surana emphasises the need for explicit grandfathering provisions covering losses, credits, incentives, and pending proceedings during the transition from the 1961 Act to the Income-tax Act 2025. He supports reducing penal provisions and moving away from aggressive enforcement, particularly for technical rather than wilful defaults.

The consensus among tax professionals reflects a desire for measured governance that prioritises compliance simplification and dispute reduction over sweeping policy overhauls. As Budget 2026 approaches, the emphasis remains on creating a stable, predictable tax environment that supports both taxpayer confidence and administrative efficiency.

Tax policy experts have presented comprehensive recommendations for Budget 2026 to enhance India's mergers and acquisitions environment, particularly with the Income-tax Act, 2025 scheduled for implementation from April 1, 2026. The suggestions aim to address existing regulatory gaps and improve the ease of doing business for M&A transactions.

Fast-Track Demerger Tax Neutrality

A primary recommendation involves extending tax neutrality to fast-track demergers under Section 233 of the Companies Act, 2013. Currently, the Income-tax Act, 2025 provides tax neutrality only to NCLT-approved demergers under Sections 230 to 232, excluding fast-track demergers that enable small or closely held companies to undertake demergers without court approval.

The finance ministry's rationale for excluding fast-track demergers centers on concerns about potential valuation manipulation without court oversight. However, experts argue this approach contradicts the ease of doing business agenda, forcing genuine taxpayers to choose between transaction efficiency and tax benefits.

Contingent Consideration Clarity

Experts emphasize the need for clear taxation guidelines on earn-out, profit-linked, or contingent consideration arrangements that have become increasingly common in M&A transactions. These arrangements tie part of the sale consideration to achieving specific profitability or financial milestones.

The current legal framework lacks clarity on:

• Taxability of contingent payments
• Timing of taxation for such arrangements
• Treatment of milestone-based considerations

Foreign Company Merger Anomalies

The recommendations address existing inconsistencies in foreign company merger taxation. While foreign companies enjoy capital gains tax exemptions on direct or indirect share transfers during mergers with other foreign companies, shareholders of the amalgamating company face potential capital gains liability on share swaps.

This creates an anomaly compared to domestic mergers, which provide exemptions at both company and shareholder levels.

Capital Gains Tax Rate Concerns

The recent capital gains tax regime rationalization introduced higher long-term capital gains tax rates, which experts suggest adversely impacts investor returns and exit efficiency. The increased rates potentially drive investors toward jurisdictions with more favorable tax regimes.

Key concerns include:

• Reduced post-tax returns for investors
• Decreased competitiveness with other investment destinations
• Impact on foreign capital attraction

Experts recommend reducing capital gains tax rates, suggesting restoration of the earlier 10.00% rate to improve India's competitive position in attracting foreign investment.

Strategic Implementation Timeline

With the Income-tax Act, 2025 set for April 1, 2026 implementation, Budget 2026 represents the final opportunity to incorporate these amendments before the new framework takes effect. The recommendations aim to position India as a preferred destination for cross-border M&A activities while maintaining regulatory integrity and supporting corporate growth objectives.