Business leaders in India are urging for targeted tax incentives and a manufacturing-linked lower tax rate regime in anticipation of the upcoming Union Budget 2026 and the implementation of the New Income Tax Act. A report by KPMG India revealed that 34% of respondents are calling for the return of the manufacturing-linked lower tax rate regime, as many income-tax incentives have expired or are nearing expiration. Previously, a lower tax rate of 15% was available to manufacturing units under section 115BAB.
Meanwhile, the report highlighted that 50% of respondents are advocating for the government to focus on targeted sector-specific incentives. Respondents expressed that the launch of the New Income Tax Act marked a significant step towards simplifying income-tax laws. However, when asked about areas needing rationalization, respondents prioritized TDS and TCS compliances, the assessment and litigation process, and the capital gains tax regime.
According to the survey conducted by the business consultancy firm, over 100 industry respondents emphasized the need for “some form of safe harbour provisions” for International Financial Services Centre (IFSC) structures. Additionally, approximately 73% of respondents are seeking a substantial increase in the standard deduction for salaried individuals. Nearly half of the respondents shared concerns about the Dispute Resolution Panel route not effectively reducing unwarranted litigation.
Sunil Badala, Partner and National Head of Tax at KPMG in India, mentioned that the increase in slab rates for individuals in the last Budget, along with GST rate cuts, has boosted disposable incomes and consumption. However, stakeholders are eager for further reforms and tax incentives. One major expectation is the overhaul of the dispute resolution mechanism under direct tax laws, including the introduction of mandatory timelines for the disposal of appeals.
The survey also revealed that 71% of respondents believe that transfer pricing safe harbour rules require a revamp, especially concerning margins and thresholds across different business categories. Additionally, 82% of respondents support a review of the GST Invoice Management System to enhance reconciliation capabilities and reduce mismatches and GST tax liabilities. The survey included responses from C-Suite leaders and senior management across various sectors such as financial services, technology, life sciences, pharmaceuticals and healthcare, and consumer markets.
