BUDGET 2026: HOW TO MAKE INDIA’S NEW TAX REFORMS WORK

Budget 2026 arrives at a pivotal moment.

- SONU IYER

With the Income Tax Act, 2025, set to take effect from 1 April 2026, this year’s Budget should focus less on headline tax rate changes and more on ensuring a smooth transition to the new law.The emphasis is likely to be on ease of compliance, digital readiness, and the overall taxpayer experience, so the law moves seamlessly from statute to practice.

The Budget for FY26 operationalised the principle of “trust first, scrutinise later.” Like earlier budgets, Budget 2025 nudged taxpayers towards the new tax regime through rationalised rates and fewer deductions. Filing data shows the shift is well underway. By 31 July 2024, 72.8 million income tax returns had been filed, of which 72% were under the new regime. First-time filers numbered 5.86 million, pointing to a widening compliance base.

Budget 2026 could focus on three priorities to support the roll-out of Income Tax Act, 2025: ease of compliance through clarity and equity; stronger digital infrastructure via pre-filled returns, intuitive dashboards and AI-enabled assistance to simplify filing and reduce errors; and streamlined dispute resolution through faceless processes and time-bound mechanisms.

Some measures merit consideration, given the direction.

Selective incentives for savings where they matter