The Income-tax Act, 2025, which is slated to come into force from 1 April 2026, is the product of an extensive consultative exercise, involving a Parliamentary Committee, wide-ranging stakeholder representations, and detailed deliberations before its eventual enactment. Against this backdrop, it would ordinarily be expected that the forthcoming Budget would refrain from proposing substantive changes to direct tax law, particularly to a statute that is yet to be operationalised. Any premature tinkering with the framework risks diluting the objective of introducing a clean-slate, simplified legislation. It is the concerns around tax administration and implementation that need to be addressed, emphasises Dinesh Kanabar, chairman and CEO at Dhruva Advisors.According to him, policy expectations can broadly be classified into four baskets.Easier compliance and rationalisation of withholding taxes: One of the most pressing areas requiring attention is simplification of compliance, particularly in the area of tax deduction at source (TDS). The current regime prescribes multiple rates across numerous sections, creating significant interpretational challenges. Litigation frequently arises around the applicable rate, classification of payments, and procedural lapses—often without any underlying revenue loss. There is a strong case for rationalising TDS rates into two or three broad buckets.For example: One rate for salary income, one uniform rate for most non-salary payments and a separate, higher rate for exceptional categories such as lottery winnings or similar windfall incomes. Such rationalisation would dramatically reduce compliance complexity.“Large taxpayers today maintain sizeable teams merely to manage withholding tax compliance and litigation risk. Simplifying TDS rates would lower compliance costs, reduce disputes, and free up productive resources, without materially impacting revenue collection,” he emphasises. Tax policy levers to support growth and high-technology manufacturing: India has articulated a clear ambition to position itself as a global hub for high-technology manufacturing, including artificial intelligence, semiconductors, and advanced electronics. These sectors are capital-intensive and R&D-heavy, requiring sustained investment in research and innovation.At present, however, India offers no meaningful tax incentive for research and development expenditure. This stands in contrast to many competing jurisdictions that actively use tax policy to attract cutting-edge innovation.“The Budget presents an opportunity to re-examine whether targeted R&D incentives—designed carefully to avoid misuse—can be reintroduced or recalibrated, particularly for sunrise sectors critical to India’s long-term competitiveness. This assumes added significance in light of the evolving global mobility landscape. A number of highly skilled Indian professionals, particularly in science and technology, may consider returning to India due to constraints around work visas such as the H-1B in the United States. Creating a robust domestic ecosystem for research and innovation, supported by sensible tax incentives, could help India productively absorb this talent,” states Kanabar. Addressing the mounting burden of tax litigation: Kanabar points out that prolonged litigation has an adverse fall out for both taxpayers and the government. The Revenue is deprived of its dues, beyond the standard 20% pre-deposit, for several years.Taxpayers carry prolonged contingent liabilities, affecting cash flows, balance sheets, and business decisions—even in cases where additions may ultimately not survive. India’s experience with tax dispute resolution schemes has been largely positive. Schemes introduced in the past, including those rolled out in 2020 and revisited in 2024, witnessed significant participation and resulted in meaningful revenue mobilisation and dispute reduction. “There is a strong case for re-imagining a comprehensive dispute resolution framework, both for direct taxes and for indirect taxes, particularly customs, where litigation has accumulated over decades. A well-designed scheme can unclog the appellate system, provide certainty to taxpayers, and deliver immediate fiscal benefits to the exchequer,” he states. Tax administration and respect for taxpayer sentiment: Lastly Kanabar points out that the Budget must reinforce the principle that tax administration should be facilitative, not adversarial. Concerns around indiscriminate issuance of notices, mechanical reopening of assessments, and lack of accountability continue to affect taxpayer confidence. While faceless processes have reduced some friction, they have also introduced new challenges relating to responsiveness, proportionality, and application of mind. What is required is not another layer of legislation, but administrative sensitivity. An approach that recognises that taxpayers are partners in nation-building and that certainty, fairness, and predictability are integral to ease of doing business, he sums up.