Instead of implementing significant policy changes, taxpayers anticipate that the government will prioritize relaxing TDS standards, streamlining compliance, and fortifying dispute resolution structures as the Union Budget 2026 approaches.
Lower TDS Expectations Ahead of Budget 2026
People in the lower and moderate income categories are calling for a reduction in TDS. The current method causes needless paperwork and cash flow issues for a large number of taxpayers. TDS dramatically lowers cash flow for both salaried employees and business owners, with current rates ranging from 10% to 30%.
Faster reimbursements must be implemented right away; today, taxpayers must wait six to twelve months to receive their return, costing them billions of rupees in lost capital. Stellar Innovations’ Vice President of Tax and Transition, Karthik Narayan, stated.
Push for Faster Refund Processing
“Refund payments should be processed within 30 days thanks to AI technology, and taxpayers should be able to file Form 16 more easily.” Additionally, Narayan suggested raising the TDS exemption level to Rs 5,00,000.
According to tax experts, Budget 2026 might have a significant impact without using dramatic tax cuts.
Need for Stability and Certainty
The emphasis should be on certainty rather than frequent adjustments to rates or slabs, according to Ankit Rajgarhia, Designate Partner at Bahuguna Law Associates. “A streamlined withholding regime with fewer rates and clearer rules is necessary,” he claims. He continues, “Faster conflict resolution and administrative remedies to handle long-pending lawsuits would help reduce burden on the system.” Rajgarhia thinks that the new tax system would offer targeted relief for salaried people through higher standard deductions and clearer provisions.
Another ongoing issue is refund delays. Refunds are still delayed due to small discrepancies between annual information statements, bank-reported data, and employer filings, even with advancements in automation. These disparities frequently have no impact on the real tax bill, but they nevertheless result in verification inspections that cause processing to lag.
Why Refund Delays Matter to Households
Refunds are not incidental for households handling regular investments, education costs, and EMIs. Money that may have been used for other purposes is represented by excess tax deducted during the year. Refund processes should be more predictable and shorter, according to taxpayers, since the majority of income data is currently digitally accessible.
Conservative withholding has an effect on more than just individuals. Businesses are also under pressure, especially in industries with short cash cycles. Payments to suppliers and service providers may be subject to several tax deduction layers, which could restrict working capital and raise compliance costs.
💰 How Conservative TDS Impacts Cash Flow
- Who is affected: Salaried taxpayers and small businesses
- Main issue: Excess tax deducted upfront
- Impact: Reduced monthly liquidity
- Result: Increased dependence on refunds
- Taxpayer demand: More accurate withholding during the year
🏭 Business Liquidity Under TDS Pressure
- Affected sectors: Tight cash-cycle industries
- Challenge: Multiple layers of tax deduction
- Consequence: Working capital locked up
- Expert view: Real-time income visibility can ease pressure
- Goal: Protect liquidity without harming revenue collection
Liquidity Stress Across the Value Chain
High upfront deductions have an impact on liquidity at both the individual and project levels, according to Subham Kalindi, a senior executive of a renewable energy company. He claims that “stress is created across the value chain when cash is locked up due to conservative withholding.” “More efficient use of real-time income visibility can lessen this strain without compromising revenue collection.”
Investors are watching Budget 2026 for stability rather than new tax changes, while individual taxpayers are concentrating on cash flow and refunds. Master Capital Services’ Chief Research Officer, Ravi Singh, does not anticipate any additional changes to capital gains taxation this year. He claims that since long-term investors have already adapted to previous changes, predictability is now more important than small compromises.
Consistency Across Income Groups
The message is the same for all income levels. A system that returns excess amounts without difficulty and makes more precise deductions throughout the year is what taxpayers are requesting.
Many people think that if the goal of the streamlined tax system is to facilitate compliance, it should go beyond the day of filing.
Journalist Ayush Mishra covers personal finance with a focus on banking, credit, and taxes. Having worked at Business Standard, he tells captivating tales that simplify difficult financial choices.
Frequently asked questions
1. Why do taxpayers want Budget 2026 to have lower TDS rates?
According to taxpayers, the present TDS rates (10–30%) cause needless refund claims and lower monthly cash flow. Particularly for middle-class and salaried workers, less paperwork and financial stress would result from lower or more accurate TDS.
2. What is the primary problem with today’s income tax refunds?
Even in cases when the tax liability is obvious, refunds frequently take six to twelve months because of small data inconsistencies and verification delays. This prevents households and businesses from using money that they may otherwise utilize.
3. In what ways may AI expedite tax refunds?
Refunds can be processed within 30 days without the need for human intervention thanks to AI’s ability to automatically reconcile employer filings, bank data, and AIS details in real time.
4. Why is it crucial to raise the TDS exemption threshold?
In order to avoid forcing small taxpayers into needless deduction and refund cycles and to make compliance easier for millions of people, experts recommend raising the exemption level to ₹5 lakh.
5. Do taxpayers anticipate significant tax reductions in the 2026 budget?
No, the majority of investors and taxpayers prefer stability, clarity, and quicker administration over periodic modifications to capital gains laws or slabs.
Conclusion
As Budget 2026 draws near, taxpayers want a system that functions well all year long rather than significant tax cuts. Without negatively affecting revenue collection, lower and more accurate TDS, quicker refunds, easier compliance, and speedier dispute resolution might greatly increase efficiency and trust.
Timely access to one’s own funds is crucial for both individuals managing growing living expenses and enterprises with tight cash cycles. The promise that the new tax system will make life easier for taxpayers must be reflected not only on filing day but also throughout the year in terms of deductions, refunds, and resolution schedules.
Disclaimer:
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Readers are advised to consult a qualified professional before making any tax-related decisions.
