ICAI Welcomes Union Budget; Says Tax Reforms Will Boost Ease of Doing Business

The Institute of Chartered Accountants of India (ICAI) has welcomed the maiden Union Budget featuring reforms under the Income-tax Act, 2025, calling it a progressive step toward simplifying tax laws, reducing litigation, and strengthening the ease of doing business in India. The new provisions are set to come into effect in the next fiscal year.

ICAI highlighted its active role in shaping the legislation, noting that the Institute collaborated closely with the Government at multiple stages. Beginning with initial suggestions to the CBDT Committee for a comprehensive review of the Income-tax Act, 1961 in September 2024, ICAI followed up with detailed inputs in December 2024. It later presented preliminary suggestions on the Income-tax Bill, 2025 before the Select Committee in March 2025 and submitted a detailed memorandum in April 2025.

In addition to policy inputs, the Institute undertook extensive outreach initiatives to familiarise the public with the new tax framework. Nearly 50 awareness programmes have been conducted so far, along with an eight-week webinar series held during December 2025 and January 2026 featuring expert discussions on various aspects of the law. ICAI also continued its publication support for the Income-tax Department after the enactment of the legislation.

Positioning itself as a partner in nation-building, ICAI said it has been entrusted with designing short-term modular courses and practical tools to develop a cadre of “Corporate Mitras,” particularly in Tier-II and Tier-III towns, to help MSMEs meet compliance requirements at affordable costs.

Pre-Budget Recommendations Reflected in Finance Bill

ICAI stated that several of its recommendations were incorporated into the Finance Bill, 2026. The Institute had presented its Pre-Budget Memorandum to the CBDT Chairman in October 2025 and later submitted additional suggestions on November 14, 2025, along with FAQs on the new tax regimes and Tax Deduction at Source.

Among the key proposals considered by the Government are the decriminalisation of prosecution provisions, rationalisation of penal provisions, reduction of the tax rate from 60% to 30% in cases involving unexplained investments or expenditures, immunity from penalties for misreporting, exemption from TAN for residents purchasing immovable property from non-residents, extension of the deadline for filing revised returns, and provisions allowing updated returns where losses are reduced. The plan to phase out ICDSs from the tax year 2027–28 has also been accepted.

Additional suggestions taken on board include exemption of TDS on interest income paid to co-operative banks, inclusion of pre-construction interest within the ₹2 lakh limit, and removal of dual references to Section 144.

Measures to Reduce Litigation and Compliance Burden

According to ICAI, the Budget proposals focus strongly on mitigating litigation and easing compliance. The deadline for filing income tax returns has been extended from July 31 to August 31 for businesses not subject to tax audit. Further, a rule-based automated system will enable taxpayers to obtain lower or nil deduction certificates without approaching the Assessing Officer.

The decriminalisation and rationalisation measures are expected to help businesses focus more on growth by reducing legal disputes.

Simplified Processes for Taxpayers

The Finance Minister has also announced redesigned tax forms aimed at making compliance easier for ordinary citizens. ICAI confirmed that it has provided inputs to the committee tasked with simplifying ITR forms.

Push for Global Competitiveness

On the international taxation front, the introduction of the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 (FAST-DS 2026) has been described as a balanced approach that addresses genuine hardships faced by small taxpayers while retaining safeguards under the Black Money Act.

Clarification of Dispute Resolution Panel timelines is expected to bring procedural certainty and reduce interpretational conflicts. Meanwhile, a proposed long-term tax holiday for global cloud services using Indian data centres until 2047, along with safe harbour rules for data centres and electronics warehousing, signals India’s ambition to become a global hub for digital and AI infrastructure.

Targeted tax exemptions for foreign companies supplying capital equipment to electronics manufacturers, MAT exclusions for certain presumptive-taxation businesses, and relief for non-residents rendering services under notified schemes are also expected to enhance investor confidence and support strategic sectors.

ICAI emphasised that through sustained engagement—from policy recommendations to public outreach—it has contributed to improving clarity in tax legislation and lowering compliance burdens. The Institute noted that the reforms align with the broader objective of the Income-tax Act, 2025: simplifying legal language, fostering trust, and creating a stable regulatory environment that allows businesses to focus on innovation and growth.