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Budget 2026 Expectations Focus on Targeted Relief
As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1, anticipation among middle-class taxpayers centers on whether further income tax relief will materialize. While Budget 2025 delivered significant changes, making income up to ₹12.75 lakh tax-free for salaried individuals, the focus for Budget 2026 appears more selective. Experts suggest a departure from broad slab restructuring, leaning instead towards targeted adjustments.
Budget 2025's Tangible Impact
Last year's budget brought a substantial overhaul to the new tax regime. Key changes included raising the basic exemption limit from ₹3 lakh to ₹4 lakh and increasing the standard deduction for salaried taxpayers from ₹50,000 to ₹75,000. The highest tax rate was shifted to apply only beyond ₹24 lakh, a notable change from the previous ₹15 lakh threshold. These adjustments, coupled with an enhanced rebate under Section 87A, effectively made income up to ₹12 lakh tax-free for many and resulted in savings potentially reaching ₹1.14 lakh. For the first time in years, these tax savings translated directly into higher take-home pay for millions.
Selective Relief for Budget 2026
With the significant reset in Budget 2025, analysts widely agree that sweeping changes to tax slabs are unlikely in Budget 2026. "We don’t really foresee any significant changes in this year’s budget, for salaried classes, considering the overhaul of slabs rates done last year," noted Richa Sawhney, Partner, Tax at Grant Thornton Bharat. The majority of taxpayers have already migrated to the new regime.
Instead, taxpayer hopes are pinned on specific, targeted relief. Key expectations include a further increase in the standard deduction, ideally to ₹1 lakh. There is also significant anticipation around raising the income threshold for the 30% tax bracket from the current ₹24 lakh to ₹35 lakh. Easing surcharge rates and allowing deductions for expenses like mediclaim and housing loans within the new regime are also on the wish list.
Beyond Slabs: Administrative Reforms
Akshay Jain, Direct Tax Partner at NPV & Associates LLP, pointed out that with the Income-tax Act, 2025, coming into force from April 1, 2026, clarity on transition, compliance timelines, and dispute resolution is paramount. Taxpayers are looking for simplified reforms, enhanced taxpayer services, reduced disputes, and speedier redressal mechanisms, rather than solely numerical tax cuts. Rationalization of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) rates is also sought to improve immediate cash flows.
Emerging ideas include incorporating capital gains income within the ₹12 lakh rebate threshold and providing relief to remaining old regime users, particularly concerning home loan interest and NPS contributions. Optional joint taxation for married couples, a system seen in several global economies, is another proposal gaining traction.
Ultimately, many experts believe the most significant relief for the middle class in Budget 2026 may not come from lower rates but from a tax system that operates smoothly and predictably.