Taxpayers’ Budget Wishlist: Simpler Compliance, Clearer Laws and Incentives to Tackle Air Pollution

With the Union Budget just days away, anticipation is building among Indian taxpayers, who traditionally look to the Finance Minister for relief, reforms and reassurance. Each year brings a long wishlist, but this time expectations are shaped by a larger push towards simplification, digitisation and addressing pressing social challenges. As the government prepares its fiscal roadmap, several tax-related reforms are being keenly watched.

One of the most widely discussed expectations is the proposal for a “One Nation, One Income Tax Return (ITR) Form”. At present, taxpayers have to choose from seven different ITR forms depending on their income sources and category. This multiplicity often leads to confusion, errors and compliance challenges, especially for individuals whose income profiles change from year to year. Selecting the wrong form can result in notices and delays in processing refunds.

The idea of a single, uniform ITR form is not new and has been considered by the government in the past. With the proposed New Income-tax Act set to replace the six-decade-old law, the timing appears particularly suitable to revisit this reform. A unified ITR form could be designed in a modular manner, where taxpayers first select their entity type and sources of income, after which only the relevant schedules are displayed. Such a system would significantly simplify the return-filing process and enhance the user experience, while also reducing inadvertent non-compliance.

Another major expectation relates to clarity around the New Income-tax Act, which is scheduled to come into effect from April 1, 2026. Over the years, thousands of circulars and notifications have been issued under the existing Income-tax Act, 1961. Many of these continue to guide interpretation and compliance. Tax experts suggest that the government should issue a comprehensive master circular listing all circulars that remain applicable under the New Act, with clear references to the corresponding new sections. Circulars linked to provisions that no longer exist could be removed. Updating and reissuing this master circular annually would help taxpayers and professionals alike navigate the law with greater certainty and align with the government’s stated goal of making tax laws simpler and more transparent.

Reforms in the Tax Deduction at Source (TDS) framework also feature prominently on the wishlist. TDS compliance is widely seen as time-consuming and complex, imposing a significant administrative burden on businesses and individuals. There is a growing call to rationalise TDS provisions by reviewing sections that contribute minimally to revenue and either merging or removing them. Any revenue impact could be adjusted through advance tax mechanisms. Limiting TDS to just two or three standard rates is also being advocated to ease compliance.

In addition, experts argue that the requirement to issue physical or separate TDS certificates has become redundant, as all relevant data is already available through Form 26AS and the Annual Information Statement. Introducing a TDS ledger mechanism could further help reduce disputes related to mismatches between income and tax credits, thereby lowering litigation.

Beyond compliance reforms, taxpayers are also looking to the Budget to address broader societal challenges, particularly air pollution. Several Indian cities continue to rank among the most polluted globally, raising serious public health concerns and even prompting international travel advisories. While tackling pollution requires a multi-pronged approach, tax policy can play a supportive role. One suggestion is to provide targeted tax incentives for the purchase of electric vehicles under the new personal tax regime. Although the government has been steadily moving towards lower tax rates with fewer exemptions, many believe an exception is justified given the scale of the health emergency posed by pollution.

There is also a proposal to encourage companies to allocate a portion of their corporate social responsibility spending towards pollution control research and government-approved environmental initiatives, with explicit tax deductibility for such expenditure.

As Budget day approaches, taxpayers hope these measures will be viewed favourably. While some proposals align closely with the government’s ongoing reform agenda, others reflect the growing demand for tax policy to play a role in addressing real-world challenges that affect everyday life.