Recommendations for Upcoming Union Budget: Enhancing Deductions and Tax Filing Flexibility

A recent report outlines crucial recommendations for the upcoming Union Budget, emphasizing the need for increased standard deductions for salaried employees and extended timelines for tax return submissions. The report from KPMG India also suggests allowing housing loan interest deductions and clarifying tax exemptions for foreign companies. Additionally, it addresses the complexities surrounding redemption premiums on debentures and proposes measures to expedite indirect tax refunds. These recommendations aim to enhance the ease of doing business and improve India's competitiveness in attracting foreign investment.

By Narendra Chaudhary Jan 10, 2026, 15:32 IST

Key Recommendations for the Union Budget

New Delhi, Jan 10: A recent report suggests that the government should contemplate increasing the standard deduction for salaried individuals, extending deadlines for late tax returns, and implementing various measures to facilitate business operations in the forthcoming Union Budget.

The analysis from KPMG India highlights that one of the primary expectations from the budget is to raise the standard deduction for salaried employees to Rs 1 lakh. Additionally, it recommends extending the timelines for submitting revised or belated returns, particularly to assist taxpayers dealing with cross-border income reporting.

According to the report, individuals with cross-border investments may face challenges when their tax returns in their home or host countries are not finalized, which can result in discrepancies in income reporting.

The advisory firm also proposed that the government permit deductions for housing loan interest against salary income, even for self-occupied properties. This recommendation aims to alleviate the financial burden of home loan repayments and encourage home ownership.

On the corporate tax side, the report advocates for clear exemptions for foreign entities under presumptive tax regimes and calls for a minimum alternate tax (MAT) exemption for incidental income linked to specific business activities like shipping, civil construction, or oil exploration.

Current regulations pose challenges for foreign companies when incidental income is earned alongside business income, potentially subjecting them to MAT, which the report argues could hinder India's attractiveness for foreign investment.

Furthermore, the report notes that courts have sometimes classified redemption premiums on debentures as interest, creating ambiguity regarding tax treatment under Section 76 of the Income Tax Act, which presumes such premiums as short-term capital gains. This uncertainty affects tax calculations and withholding responsibilities for both issuers and investors.

In terms of indirect taxes, the report recommends allowing provisional refunds for cases involving inverted duty structures, which would help accelerate refunds, enhance liquidity, and minimize delays through a risk-based approach.