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Budget 2026: Biz Leaders Demand Lower Manufacturing Tax, Sector Incentives

Business leaders are advocating for significant tax reforms ahead of the Union Budget 2026, with a strong focus on reviving a lower tax regime for manufacturing units and introducing targeted sector-specific incentives. A KPMG India survey highlights widespread demand for simplifying TDS/TCS compliances and overhauling the capital gains tax regime. Respondents also seek a major increase in the standard deduction for salaried individuals and a revamp of the GST Invoice Management System to reduce mismatches. The survey underscores an industry-wide call for more efficient dispute resolution mechanisms and updated safe harbour rules to foster a better business environment.

Key Points: Business Demands for Budget 2026: Tax Cuts & Incentives

  • 34% seek return of manufacturing-linked lower tax
  • 50% want targeted sector-specific incentives
  • 73% demand hike in standard deduction for salaried
  • 82% call for GST system review
2 min read

Budget 2026: Business leaders seek lower tax for manufacturing units, sector-specific incentives

Industry survey reveals key demands for Budget 2026: lower manufacturing tax, sector-specific incentives, and GST system reforms to boost growth.

"The launch of the New Income Tax Act has certainly been a big step towards a simplified income-tax law - KPMG Survey Respondents"

New Delhi, Jan 27

Business leaders in India voiced strong demand for targeted tax incentives and manufacturing linked lower tax rate regime in anticipation of the Union Budget 2026 and the implementation of the New Income Tax Act, a report said on Tuesday.

The report from KPMG India said 34 per cent of respondents called for the return of the manufacturing‑linked lower tax rate regime, as many income-tax incentives already expired or approached sunset.

Earlier a lower tax rate of 15 per cent was available u/s 115BAB to manufacturing units.

Meanwhile, 50 per cent respondents wanted the government to focus on targeted sector‑specific incentives, the report said.

"The launch of the New Income Tax Act has certainly been a big step towards a simplified income-tax law," most respondents said, however, when asked where rationalisation is needed most, respondents ranked TDS and TCS compliances followed by the assessment and litigation process, and the capital gains tax regime among top priorities.

The business consultancy firm said that the survey of over 100 industry respondents showed that 51 per cent of them wanted "some form of safe harbour provisions" for International Financial Services Centre (IFSC) structures. Roughly 73 per cent respondents wanted a significant hike in the standard deduction for salaried individuals.

Nearly 50 per cent of respondents shared their view of the Dispute Resolution Panel route not effectively reducing unwarranted litigation, the report said.

"The increase in slab rates for individuals in the last Budget coupled with GST rate cuts have enhanced disposable incomes and raised consumption. However, stakeholders continue to look forward to furthering reforms and tax incentives," Sunil Badala, Partner and National Head of Tax, KPMG in India.

A 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, Badala noted.

Around 71 per cent of respondents said they believed transfer pricing safe harbour rules need a revamp, particularly in terms of margins and thresholds across different business categories.

Almost 82 per cent of respondents supported a review of the GST Invoice Management System and provide enhanced reconciliation capabilities to reduce the mismatches and increase in GST tax liabilities.

The survey took responses from 100 respondents including C-Suite leaders and senior management of diverse sectors including financial services, technology, life sciences, pharmaceuticals and healthcare, and consumer markets, the report noted.

- IANS

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Reader Comments

P
Priya S
While incentives for business are important, I'm glad to see 73% want a higher standard deduction for salaried individuals. The middle class is squeezed between inflation and high taxes. Our disposable income needs a real boost to drive consumption.
R
Rahul R
The point about the Dispute Resolution Panel is spot on. The tax litigation process in India is a nightmare for honest businesses. It drains time and resources. Mandatory timelines for appeal disposal are an absolute must. Simplify the law, but also simplify the process.
A
Ashley H
Working in the tech sector, I see the need for targeted incentives. A one-size-fits-all approach doesn't work. Green energy, semiconductors, and deep-tech need specific support to build a future-ready economy. Hope the budget is strategic.
K
Karthik V
82% asking for a GST system review says it all. The current portal has too many mismatches leading to unnecessary notices and working capital blockage. Enhanced reconciliation before filing is a basic need, not a luxury. Please fix this, CBIC.
M
Meera T
A respectful criticism: While business leaders' surveys are important, I hope the budget also focuses on the informal sector and farmers. Job creation at the bottom of the pyramid will sustain the demand that these manufacturing units need. The budget must be balanced.

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