Budget 2026 Expectations: Ambiguity in Income Tax Act Demands Fix Before Implementation, Say Experts
Experts have urged that the budget 2026 should go beyond rate cut slabs revisions and instead will have to focus on administrative clarity and taxpayer confidence.
As the union budget of 2026 is closing in, India is also preparing for the rollout of the new Income Tax Act in April. Experts say that compliance procedures and ambiguity related to the new act have to be addressed.
The new Income Tax Act will replace the 64‑year‑old Income Tax Act of 1961. Although the new act was a much-awaited change, it was also a long-overdue reform. Taxpayers and practitioners are widely uncertain due to the lack of detailed rules, filing methods, and compliance frameworks.
The major concerns raised by the experts include that rules, forms and FAQs have not yet been notified. This can create confusion among taxpayers about how to comply.
Also, more than 5.49 lakh appeals are still pending before Commissioners (Appeals) and higher appellate authorities, as reported by the Ministry of Finance. Thus, shifting into a new law increases the risk with such a huge backlog of cases, which can overwhelm the system even more.
Businesses, especially MSMEs, fear that without simplified procedures, the new act will only replicate the same challenges of excessive notices and stricter deadlines. Practitioners have highlighted that clarity on carry forward of losses, treatment of ongoing assessments and transitional provisions is essential to avoid litigation.
As reported in Good Returns, the government successfully moved over 80% of taxpayers to the new simplified tax regime—fewer than 20% now use the old regime. That's a major win. The expectation is that the government will maintain stability in this regime rather than making frequent changes.
As regards the GST, GST 2.0 was introduced in 2025-26. Even though the government is not likely to announce major changes, taxpayers can expect consolidation and more clarity on existing provisions and may see some rationalisation in selected categories
Experts have urged that the budget 2026 should go beyond rate cut slabs revisions and instead will have to focus on administrative clarity and taxpayer confidence. This clarity includes immediate release of new return formats, filing procedures and explanatory FAQs to guide taxpayers. Also, strengthening faceless appeals and faster disposal of pending matters to reduce litigation.
Read more: ‘Tax Planning Cannot OverrideLaw’: Supreme Court says Planning must be within Statutory Provisions
Rationalisation of penalty structures, flexible filing timelines, and improved IT systems can ease compliance for individuals. Clear guidelines have to be provided on how existing assessments and appeals, and carry-forward benefits, will be treated under the new law.
"The real headache is Tax Deducted at Source (TDS). Currently, there are nearly 37 different categories for resident payments—rent, professional fees, contractor payments, and commissions—each with different rates. Most disputes happen simply because the payer and tax department disagree on which category applies. Tax professionals hope the government will at least announce its intention to rationalize these categories, even if the actual implementation takes time. This would signal policy direction and reduce uncertainty," said CA and Digital Content Creator Isha Jaiswal
The Experts have also stressed that a lack of clarity could trigger disputes, adding to the already massive backlog. Also, taxpayers may struggle with filing returns correctly, leading to penalties and confusion and without transparent rules, the credibility of the new Act could be undermined before it even begins.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
