FICCI's Budget Demands: How Tax Reforms Could Boost India's Business Climate

FICCI calls for immediate steps to reduce a large backlog of appeals before the Commissioners of Income Tax (Appeals), saying pending cases and blocked refunds strain taxpayers and the system according to a press release.

It recommends filling vacancies, setting differentiated, time-bound targets for small and complex cases, enabling virtual hearings on a fixed schedule, and granting stays on recovery if an appeal crosses two years without taxpayer fault. It also urges better coordination between faceless units and jurisdictional officers on remand reports, and proposes sharing draft orders with appellants to correct factual errors early.

On cash flow pressure during disputes, FICCI has asked that the current expectation of a 20 per cent deposit for a stay be rationalised. It proposes real-time integration of stay orders with the Central Processing Centre (CPC) to stop automatic refund adjustments against stayed demands and suggests allowing bank guarantees or indemnities as alternate security, with safeguards and monitoring.

To lower compliance burden, FICCI proposed a simpler TDS framework: slab-based TDS for salaries, maximum marginal rate for lotteries and online games, and only two standard rates for other payments. It suggests exempting B2B payments already reported under GST from TDS, removing low-yield TDS/TCS on purchase or sale of goods, and publishing a negative list covering items such as payments to senior citizens, exempt incomes, banks and registered GST entities.

For manufacturing supply chains, FICCI requests explicit assurance that storing components or deploying free-of-cost equipment in India for just-in-time production by contract manufacturers does not create a "business connection" for non-residents under the Income-tax Acts of 1961 and 2025. It says this clarity would support technology deployment and competitiveness while limiting unintended tax exposure and litigation.

FICCI also sought for restoration in the new Income-tax Act, the earlier definition of "Associated Enterprise" to avoid widening transfer pricing coverage to commercially unrelated parties, which could trigger fresh disputes for lenders, contract manufacturers, and brand owners.

On capital distribution, the chamber has recommended aligning taxation of buybacks with capital reduction at least where buybacks use share premium or fresh issue proceeds, noting that treating the full consideration as a dividend can tax capital rather than profits. It has also asked for clarity on interaction with anti-abuse provisions and treaty treatment to prevent inconsistent field practices.

For customs, FICCI has urged more benches of the Customs Authority for Advance Rulings beyond New Delhi and Mumbai to serve the south and east, and a mechanism to extend rulings when facts and law remain unchanged. It has recommended allowing newly incorporated companies in groups already accredited under the Authorised Economic Operator programme, domestically or abroad, to apply for AEO status, and to continue Tier-II status post-merger through simple intimation. It has further called for a single, real-time national database of trade notices to ensure uniform practices across ports.

FICCI stated that these measures would ease working capital stress, reduce litigation, and improve investor predictability as the government prepares the 2026-27 Budget.

- ANI