Lower TDS, faster refunds: What taxpayers want in the new tax system

Union Budget 2026

• Taxpayers want easier TDS norms and faster refunds in Budget 2026
• Calls to raise TDS exemption threshold to Rs 5 lakh and simplify Form 16 filing
• Businesses and individuals want predictable refunds and reduced compliance burden.

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As the Union Budget 2026 draws closer, taxpayers are expecting the government to prioritise easing TDS norms, simplifying compliance, and strengthening dispute resolution frameworks, instead of rolling out major policy changes.

Rethinking the need for TDS requirements

There is a demand for reducing TDS for people in the lower and middle-income groups. For many taxpayers, the current system creates unnecessary paperwork and cash flow problems. “With current TDS rates ranging from 10 percent to 30 percent, TDS significantly reduces cash flow for both salaried workers and entrepreneurs. Faster refunds must be introduced immediately; taxpayers currently experience a 6-12 month waiting period before receiving their refund, causing billions of rupees in lost capital. said Karthik Narayan, Vice President (Tax & Transition), Stellar Innovations.

“AI technology should be utilised to allow Refund Payments to be processed within 30 days, and taxpayers should be able to file Form 16 in a simplified manner. The threshold for TDS exemption should also be raised to Rs 5,00,000,” Narayan said.

Tax professionals say Budget 2026 could make a meaningful difference without resorting to headline-grabbing tax cuts.

Ankit Rajgarhia, Designate Partner at Bahuguna Law Associates, says the focus should be on certainty rather than frequent changes to rates or slabs. “What is needed is a simplified withholding framework with fewer rates and clearer rules,” he says. Faster dispute resolution and administrative remedies to address long-pending litigation would also ease pressure on the system, he adds. For salaried taxpayers, Rajgarhia believes clearer provisions and a stronger standard deduction within the new tax system would provide targeted relief.

Refund delays remain another persistent concern. Despite improvements in automation, refunds are still held up over minor mismatches between employer filings, bank-reported data and annual information statements. In many cases, these discrepancies have little bearing on actual tax liability but still trigger verification checks that slow processing.

For households managing EMIs, education expenses and regular investments, refunds are not incidental. Excess tax deducted during the year represents money that could have been deployed elsewhere. With most income data already available digitally, taxpayers argue that refund timelines should be shorter and more predictable.

The impact of conservative withholding is not limited to individuals. Businesses, particularly in sectors with tight cash cycles, also feel the strain. Multiple layers of tax deduction on payments to vendors and service providers can lock up working capital and increase compliance overheads.

Subham Kalindi, a senior executive at a renewable energy company, says high upfront deductions affect liquidity at both the individual and project level. “When cash is locked away because of conservative withholding, it creates stress across the value chain,” he says. “Using real-time income visibility more effectively can reduce this pressure without weakening revenue collection.”

While individual taxpayers are focused on cash flow and refunds, investors are watching Budget 2026 for stability rather than fresh tax tinkering. Ravi Singh, Chief Research Officer at Master Capital Services, does not expect further changes to capital gains taxation this year. According to him, long-term investors have already adjusted to recent revisions, and predictability now matters more than incremental concessions.

Across income groups, the message is consistent. Taxpayers are asking for a system that deducts more accurately during the year and returns excess amounts without friction.

If the simplified tax system is meant to make compliance easier, many believe that promise should extend beyond filing day.