Budget 2026-27: What Taxpayers Expect from the New Tax Regime on TDS Cuts and More

G GOWTHAM
As Union Budget 2026-27 approaches, taxpayers are eagerly anticipating reforms in the new tax regime, particularly concerning TDS (Tax Deducted at Source) cuts, deduction limits, and simplifications. Here’s a detailed listicle breakdown of what taxpayers expect in the upcoming budget:

1. Lower TDS Rates Across Key Transactions

Why Taxpayers Want It:

Many taxpayers data-face high TDS deductions on salaries, interest, rent, and professional payments, which can create cash flow challenges. A reduction in TDS rates would allow individuals and businesses to retain more money upfront.

  • Expected Change:
    • TDS cuts on salaries, bank interest, and rent payments.
    • Reductions on freelancers and small businesses to reduce compliance burden.
  • Impact: Immediate increase in disposable income for taxpayers.
2. Expansion of Taxpayer-Friendly Deduction Limits

Why Taxpayers Want It:

Currently, certain deductions under the new tax regime are limited or not available. Taxpayers are expecting the government to increase limits to ease tax liability.

  • Expected Changes:
    • Higher 80C deductions, potentially up to ₹2.5 lakh.
    • Enhanced deductions for medical insurance premiums and retirement contributions.
  • Impact: Taxpayers could save more without opting for the old tax regime.
3. Simplified TDS Compliance for Small Earners

Why Taxpayers Want It:

Small businesses, freelancers, and self-employed professionals often struggle with complex TDS rules and frequent filings. Simplification could reduce errors and penalties.

  • Expected Changes:
    • Streamlined TDS rates for small payments below a certain threshold.
    • Quarterly or semi-annual TDS filing for smaller entities instead of monthly.
  • Impact: Reduced compliance burden and fewer penalties for minor errors.
4. Tax Relief on Interest Income

Why Taxpayers Want It:

Interest income from banks and post offices is often subject to TDS at 10%, which affects retirees and fixed deposit holders.

  • Expected Changes:
    • Higher exemption limits for TDS on interest income.
    • Introduction of consolidated TDS thresholds across multiple accounts.
  • Impact: Retirees and small investors can keep more of their earned interest without waiting for refunds.
5. Rationalization of TDS for Freelancers and Gig Workers

Why Taxpayers Want It:

The gig economy is growing rapidly, but TDS on freelancer payments is often high and inflexible. Taxpayers expect reforms to encourage freelancing.

  • Expected Changes:
    • Lower TDS rates for freelance, consultancy, and gig payments.
    • Threshold-based exemption for small monthly payments.
  • Impact: Freelancers retain more income and data-face simplified tax compliance.
6. Increased Thresholds for High-TDS Transactions

Why Taxpayers Want It:

Many transactions, such as rent, contractor payments, and interest, attract TDS even at relatively low amounts, causing unnecessary paperwork.

  • Expected Changes:
    • Increased TDS thresholds for rent, professional fees, and interest.
    • Thresholds tailored for urban vs rural transactions to reduce the burden on smaller taxpayers.
  • Impact: Fewer transactions are automatically subject to TDS, reducing administrative load.
7. Integration with wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital Platforms

Why Taxpayers Want It:

Taxpayers expect the government to digitally integrate TDS reporting and payments, making compliance seamless.

  • Expected Changes:
    • Unified online platform for TDS deduction, filing, and refund claims.
    • Real-time updates and auto-matching of TDS credits with taxpayers’ accounts.
  • Impact: Reduces errors, delays in refunds, and manual reconciliation.
8. Incentives for Staying in the New Tax Regime

Why Taxpayers Want It:

While the new tax regime offers lower tax rates, it lacks many deductions. Taxpayers hope for added incentives to stay under the new regime.

  • Expected Changes:
    • Partial deductions reinstated under new regime, e.g., health insurance, education loans, and provident fund contributions.
    • Simplified TDS slabs to complement the reduced tax rates.
  • Impact: Encourages voluntary adoption of the new regime without losing benefits of deductions.
Bottom Line

The Budget 2026-27 could bring TDS cuts, higher deduction limits, and simplified compliance, making the new tax regime more attractive and taxpayer-friendly. The reforms are expected to:

  • Increase take-home income.
  • Reduce compliance burden.
  • Encourage investment and saving.
  • Support the growing freelance and small business economy.
 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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