The Union Budget 2026 is poised at a critical juncture, arriving just as Indian taxpayers brace for one of the most significant fiscal transitions in recent history—the implementation of the Income-tax Act, 2025 (ITA 2025), set to take effect from April 1, 2026. This legislative overhaul represents a monumental shift, and households across the nation are looking to the upcoming Budget for clarity, stability, and measures that ensure a smooth adaptation to the new framework.
A Legacy of Simplification Leading to ITA 2025
India's personal tax landscape has been on a steady path toward simplification over recent years. The concessional new tax regime, now the default structure, introduced reduced slab rates and fewer exemptions, while capital-gains rules were harmonized across various asset classes. For the average taxpayer, these changes translated into easier filing processes, less documentation, clearer choices between tax regimes, and a reduced likelihood of inadvertent errors.
The success of these reforms is evident in the numbers: Income Tax Return (ITR) filings increased from 8.13 crore in the financial year 2023-24 to 8.68 crore in FY 2024-25, marking a growth of 6.72%. Notably, approximately 72% of taxpayers opted for the new regime in FY 2023-24, signaling broad acceptance.
Structural Simplification and the Need for Clarity
The ITA 2025 itself embodies this drive for simplicity, reducing the number of sections from 819 to 536 and cutting the overall word count nearly in half—from 5.12 lakh to 2.60 lakh. While this structural streamlining is commendable, the practical interpretation of these changes remains a concern for many individuals.
Taxpayers are hopeful that the Budget will introduce supportive measures such as a plain-English FAQ, an "old-to-new" comparison guide, and simple illustrations for common income sources like salary, rent, and capital gains. Such tools could transform this statutory rewrite into tangible time savings and reduced confusion for families nationwide.
Digital Ease and Administrative Streamlining
Digital facilitation continues to be a top expectation. The tax filing experience has already improved with prefilled returns, enhanced dashboards, and faster processing times. Strengthening these digital systems further—particularly through more comprehensive prefill of capital-gains, dividend, and interest information—would help individuals adapt to the new law with minimal follow-ups and filing-related stress.
Addressing Emerging Investment Trends
With growing retail participation in areas like Virtual Digital Assets (VDAs) and Futures & Options, there is a pressing need for clearer guidelines. Younger investors, especially those dabbling in VDAs, would benefit from streamlined rules around loss set-off and cross-category asset movements. Similarly, small investors in Futures & Options often face audit requirements designed for business traders; simpler, more practical guidance in these domains could prevent misreporting and ease compliance burdens.
Relief for Households: TCS, Disputes, and Lower-Income Support
For many families, funds being blocked due to Tax Collected at Source (TCS) on foreign remittances remains a routine challenge. While salaried taxpayers can now set off TCS against their Tax Deducted at Source (TDS) on salary, this benefit is not uniformly accessible, particularly for those with income from sources like interest and dividends. Coupled with backlogs in tax disputes, this leads to prolonged waits for refunds.
Faster hearings, clearer procedures, and more efficient disposal mechanisms—especially for small-value appeals—could provide meaningful relief, reducing household stress and unnecessary out-of-pocket costs.
Targeted Support and the Joint Taxation Proposal
Households may also seek targeted relief at the lower end of the income spectrum. Under the new tax regime, the current rebate ensures no tax liability for individuals with income up to ₹12 lakh. For salaried taxpayers, the ₹75,000 standard deduction effectively extends this relief to those with gross income up to ₹12.75 lakh. A calibrated enhancement here could help families manage inflationary pressures while maintaining system simplicity.
A related pre-Budget development is the Institute of Chartered Accountants of India's (ICAI) recommendation to introduce optional joint taxation for married couples, akin to systems in the US and Germany. Currently, each spouse files separately, which can disadvantage single-income households unable to utilize the second spouse's unused exemptions. Allowing joint returns could offer significant relief to families that pool incomes, especially where income distribution is uneven.
The Path Forward: Clarity, Simplicity, and Stability
As households prepare for this major legislative transition, their core needs are clear: straightforward rules, easy-to-understand guidance, and robust digital support. Addressing administrative hurdles like TDS/TCS complexity and delays in dispute resolution will be crucial for a confident adjustment to the new framework. The Union Budget 2026 has the opportunity to not only ease this transition but also reinforce a taxpayer-centric approach that prioritizes experience and stability in India's evolving fiscal landscape.
