Budget 2026: ICAI Proposes Renaming Advance Tax to Estimated Tax Under New Income Tax Law

Ahead of Budget 2026, the Institute of Chartered Accountants of India (ICAI) has suggested a key change under the Income-Tax Act, 2025: renaming “advance tax” as “estimated tax”. The recommendation is part of ICAI’s pre-Budget memorandum aimed at simplifying tax laws, improving clarity, and reducing disputes between taxpayers and authorities.

The proposal comes at a time when India is transitioning to a new tax framework that replaces the concepts of “assessment year” and “previous year” with a single “tax year”. Under this system, taxpayers are required to pay tax based on estimated income earned during the same year.

Why ICAI Wants The Name Changed

Under the new tax-year framework, taxes are paid based on income estimates rather than income already earned in a prior year. ICAI believes the term “advance tax” no longer accurately reflects this mechanism. Renaming it “estimated tax” would better explain that payments are calculated on projected income for the current year.

Importantly, this change is only in terminology. ICAI has clarified that payment schedules, due dates, and tax liability will remain unchanged. The intent is to make tax provisions easier to understand, especially for individual taxpayers and small businesses.

Other Key Tax Recommendations By ICAI

Apart from the renaming proposal, ICAI has put forward several other suggestions to streamline tax compliance:

• Introduction of an optional joint taxation system for married couples, allowing both spouses to claim standard deductions separately if both are salaried.
• Exclusion of Futures and Options (F&O) trading and speculative business from presumptive taxation.
• Mandatory audits for taxpayers claiming profit-linked deductions to ensure better compliance.
• Creation of a year-wise electronic ledger to track TDS, TCS, and estimated tax payments in one place.
• Simplification of return processing by limiting scrutiny to clear errors or incorrect claims.
• Clarification of surcharge rates for high-income earners and decriminalisation of certain penalties.

These measures are aimed at improving transparency, reducing litigation, and making the tax system more taxpayer-friendly.

Budget 2026 In Focus

Finance Minister Nirmala Sitharaman is set to present the Union Budget on February 1, marking her ninth consecutive budget. Expectations are high, particularly around reforms under the Income-Tax Act, 2025, which represents a major shift in how taxes are assessed and collected.

Read more: From GST To Mutual Funds: Here Is How Key Financial Changes From February 1, 2026, Will Impact You!

Conclusion

ICAI’s proposal to rename advance tax as estimated tax reflects the evolving structure of India’s tax system. While the change does not alter tax payments or deadlines, it could make compliance clearer and more intuitive. Along with other reform suggestions, the proposal highlights a broader push towards simplification and transparency in the upcoming Budget 2026.

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