Union Budget 2026: Key Expectations on Customs Duty and TDS Reforms
With the Union Budget 2026 on the horizon, anticipation is building across India's economic landscape. Stakeholders from various sectors are closely watching for potential reforms that could reshape trade and taxation policies. Among the most discussed expectations are a comprehensive overhaul of customs duties and a rationalisation of Tax Deducted at Source (TDS) provisions. These changes are seen as critical steps towards enhancing India's competitiveness in global markets and simplifying the tax compliance burden for businesses and individuals alike.
Customs Duty Overhaul: A Focus on Trade Facilitation
The proposed customs duty overhaul is expected to address long-standing issues in India's import-export framework. Industry experts suggest that the government may streamline duty structures to reduce complexities and align them with international best practices. Key areas of focus could include:
- Rationalisation of Duty Slabs: Simplifying the multiple duty rates into fewer categories to minimise confusion and improve compliance.
- Boost for Domestic Manufacturing: Adjusting duties on raw materials and intermediate goods to support Make in India initiatives and reduce production costs.
- Trade Agreement Alignment: Revising duties to comply with India's commitments under various free trade agreements, enhancing export opportunities.
Such reforms aim to make India a more attractive destination for foreign investment while protecting domestic industries from unfair competition. The move could also help curb smuggling and under-invoicing by making legal imports more cost-effective.
TDS Rationalisation: Simplifying Tax Compliance
Another major expectation from Budget 2026 is the rationalisation of TDS provisions. Currently, the TDS system involves numerous rates and thresholds, leading to administrative challenges for taxpayers and authorities. Potential reforms might include:
- Consolidation of TDS Rates: Reducing the number of TDS rates to create a more uniform and predictable system.
- Higher Threshold Limits: Increasing exemption limits for small transactions to reduce the compliance burden on individuals and small businesses.
- Digital Integration: Enhancing technology-driven processes for TDS filing and refunds to improve efficiency and transparency.
These changes are anticipated to ease the tax filing process, reduce litigation, and promote a more taxpayer-friendly environment. By simplifying TDS, the government could encourage higher compliance rates and boost overall tax revenues.
Broader Economic Implications
Beyond customs and TDS, Budget 2026 is expected to address broader economic goals such as fiscal consolidation, infrastructure development, and social welfare. The customs duty overhaul could impact sectors like electronics, automotive, and textiles, while TDS rationalisation may benefit professionals, freelancers, and MSMEs. Stakeholders are also looking for measures to support green energy, digital innovation, and skill development, aligning with India's long-term growth vision.
As the budget presentation date nears, these expectations highlight the government's balancing act between stimulating economic growth and maintaining fiscal discipline. The final announcements will be closely analysed for their potential to drive India's recovery and competitiveness in the coming years.
