Every Union Budget brings big announcements and grand promises. For ordinary taxpayers, however, the real impact lies in the small details. As Budget 2026 draws closer, expectations remain modest but meaningful. People want simpler compliance, encouragement for long-term savings, and a system that treats convenience as a right, not a luxury.
Five Changes for a Smarter Tax System
Here are five practical reforms that could make India's tax system smarter, softer, and more sensible for everyone.
One Return, One Clear Choice
The choice between the new and old tax regimes was supposed to empower taxpayers. Instead, it has created a confusing parallel paperwork universe. Form 10-IE, required to opt in or out of the new regime, represents procedural overkill. Many taxpayers forget to file it or make mistakes, losing access to the more beneficial regime.
The solution is straightforward. Embed the regime choice directly into the Income Tax Return. One single return, one clear choice, no extra forms. Ease of doing business must include ease of filing taxes, especially for salaried individuals who do not game the system and dislike unnecessary paperwork.
Reduce the Sting in Foreign Remittance TCS
The government introduced a 20% Tax Collected at Source on foreign remittances under the Liberalised Remittance Scheme to prevent tax leakages. The intent is understandable, but the current rate feels excessive.
For genuine remittances meant for family support or education, this high TCS blocks liquidity and creates avoidable financial stress. A more balanced approach would work better. Reduce the TCS rate to 10%, or introduce a slab system. Apply lower rates up to, say, ₹50 lakh, and higher rates only beyond that threshold. Compliance should be encouraged through fairness, not coerced through hardship.
Clarify Tax Rules for NPS Withdrawals
Recent changes to National Pension System withdrawal rules are a positive step. Subscribers can now withdraw up to 100% of the corpus if it stays within ₹8 lakh. If the corpus exceeds that limit, they can withdraw 80%. This adds welcome flexibility and makes NPS more attractive.
However, a significant question mark remains. Until now, only 60% of the NPS corpus was tax-free upon maturity. How will the additional 20% withdrawal be taxed? Budget 2026 must clarify this and remove the ambiguity. Ideally, the extra withdrawal should also receive tax-free status. This would reinforce NPS as a credible pillar for retirement planning, not a confusing tax puzzle.
Level the Playing Field for NPS Under New Regime
Under the new tax regime, deductions are scarce. Section 80CCD(2), which covers employer contributions to NPS, remains a rare oasis. Yet the additional ₹50,000 deduction under Section 80CCD(1B) is still unavailable in the new regime.
Extending this deduction to the new regime, and possibly enhancing it to ₹1 lakh, would send a powerful signal. Global evidence clearly shows that tax incentives drive long-term savings. A stronger NPS today means lower old-age dependency and reduced fiscal pressure on the government tomorrow.
Introduce Joint Tax Returns for Married Couples
India's tax system still treats married couples as financial strangers. Introducing joint tax returns, with a higher exemption threshold for married couples, would recognize modern household economics. This is especially relevant for double-income families.
Such a move would put more disposable income into the hands of families. It would improve tax equity and align India with global best practices. After all, if households plan their finances together, why should they not file their taxes together?
The Bottom Line
Budget 2026 does not need fireworks or dramatic announcements. It needs careful fine-tuning. Fewer forms, fairer taxes, clearer rules, and smarter incentives could go a long way. These changes would make taxation less intimidating and more humane for millions of ordinary Indians.
The author is a chartered accountant and Managing Partner of the Saturn Consulting Group.
