Budget 2026: Real-time income tax refund tracking, simpler TDS/TCS top Deloitte’s budget wishlist

Budget 2026: Real-time tracking of income tax refunds and a major simplification of the TDS/TCS framework are among the key recommendations Deloitte India has put forward for the Union Budget 2026-27.

In its FY27 budget wishlist, the consultancy has urged the government to streamline withholding tax rules, reduce compliance complexity for taxpayers, and introduce digital tools to improve transparency and efficiency across the tax system.

Income tax refund mechanism

The dashboard should display clear status indicators and indicative timelines for refund credit, improving transparency for taxpayers.

To address refund delays, the consultancy proposed adding a ‘Raise Concern’ or ‘Escalate’ button on the portal. This feature would help reduce manual follow-ups, improve the taxpayer experience, and align India’s tax system with global best practices.

Streamlining the withholding tax regime (TDS/TCS)

The firm recommended a three-category structure to simplify the system:

• Goods

• Services

• Residuary transactions (including interest and dividends)

It also suggested the use of GST data to reduce TDS/TCS compliance burden, adding that excessive withholding often causes liquidity challenges and increases administrative workload for taxpayers seeking refunds.

Other tax and customs-related recommendations

• Digitalisation of customs litigation

Deloitte urged the government to digitise the customs litigation process, enabling e-filing of letters, appeals and correspondence with customs authorities.

This would mirror the digital processes already established under GST.

Tax incentives for innovation and high-growth sectors

To strengthen India’s position as a global innovation hub, Deloitte called for expanded tax incentives, including substantial tax breaks, enhanced deductions and reduced corporate tax rates, targeted at:

• Research & development

• Renewable energy

• Artificial intelligence

• Other emerging high-potential technologies

The firm noted that countries like South Korea provide targeted R&D tax credits in strategic technologies, while the US relies heavily on market-based and tax-based mechanisms to spur innovation.

Support for exporters and MSMEs

From a broader policy standpoint, Deloitte proposed:

• Establishing a Trade Resilience Fund to help exporters and MSMEs manage tariff-related pressures and supply-chain disruptions.

• Providing green-channel treatment for compliant MSMEs at banks.

• Creating a liquidity and growth fund routed via NBFCs and fintech companies to improve credit access.