New Delhi: All eyes are now on the Union Budget 2026–27, which Finance Minister Nirmala Sitharaman will present on February 1, 2026 notably falling on a Sunday. With last year’s Budget bringing major income tax relief by making earnings up to Rs 12 lakh effectively tax-free under the new regime (and up to Rs 12.75 lakh for salaried individuals after the Rs 75,000 standard deduction), expectations are running high. Taxpayers across the country are now keen to see whether the upcoming Budget will offer further relief or introduce new changes that impact their finances.
What Changed in Income Tax Last Year?
Before looking ahead to Budget 2026, it’s important to understand what was announced in the previous Budget. The government made several key changes under the new tax regime (which became the default from FY 2025–26), giving significant relief to middle-class taxpayers.
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Here’s a simple breakdown of the revised income tax slabs under the new regime:
Up to Rs 4 lakh: No tax
Rs 4–8 lakh: 5 per cent
Rs 8–12 lakh: 10 per cent
Rs 12–16 lakh: 15 per cent
Rs 16–20 lakh: 20 per cent
Rs 20–24 lakh: 25 per cent
Above Rs 24 lakh: 30 per cent
One of the biggest highlights was the improved rebate under Section 87A, which was increased to Rs 60,000. This effectively made income up to Rs 12 lakh tax-free. For salaried individuals, the benefit went even further with the standard deduction raised to Rs 75,000, income up to Rs 12.75 lakh became tax-free under the new regime.
What Taxpayers Want from Budget 2026: Key Expectations Explained
As Budget 2026 approaches, households across India are not just watching, they’re hoping. After last year’s big reforms, expectations are now focused on deeper relief, better savings incentives and simpler compliance.
Here’s what many taxpayers are looking forward to:
1. More relief for the middle class
Middle-income earners are hoping for a higher standard deduction possibly from Rs 75,000 to Rs 1 lakh to help counter rising living costs. There is also buzz around tweaking tax slabs, especially for those earning between Rs 12 lakh and Rs 20 lakh.
With over 72 per cent of taxpayers already choosing the new tax regime, the government may further refine it to make it even more attractive, while still keeping the old regime available for those who prefer deductions.
2. Boost for investments and savings
Investors are expecting an increase in the long-term capital gains (LTCG) tax-free limit from Rs 1.25 lakh to Rs 2 lakh to encourage long-term participation in equities. There are also calls to restore indexation benefits for debt mutual funds, which were removed in Budget 2025.
Many taxpayers are also hoping for a higher Section 80C limit, fresh investment-linked deductions and stronger tax benefits for NPS to encourage long-term retirement planning.
3. Higher health insurance benefits
With medical expenses rising sharply, there is strong demand to increase deduction limits under Section 80D. Both individuals and senior citizens could benefit from enhanced tax relief on health insurance premiums to ease the burden of medical inflation.
4. Support for homebuyers and real estate
The housing sector is seeking measures to revive demand, particularly among first-time buyers. Expectations include higher interest deduction limits on home loans, better HRA exemptions for tier-2 and tier-3 cities, rationalised stamp duty and registration charges, and renewed incentives for affordable housing.
5. Relief for senior citizens
Senior citizens and retirees are looking for higher tax exemptions on interest income from fixed deposits, improved tax treatment of pension and annuity income, and stronger incentives for retirement-focused savings products.
6. Simpler tax compliance
Beyond relief, taxpayers also want ease. Key expectations include simplified ESOP taxation for startup employees, smoother tax compliance for NRIs, rationalised TDS rules, and stronger digital filing systems to reduce compliance hassles for individuals and small businesses.
