Budget 2026 income tax expectations are running high, especially among salaried employees, middle-class families, senior citizens, and investors. After multiple rounds of tax slab changes and the big headline relief of nil tax up to ₹12.75 lakh (after standard deduction under the new regime), taxpayers are now asking the obvious question: What’s next?
With Finance Minister set to present Union Budget 2026–27 on February 1, the focus is firmly on new vs old tax regime, rebates, deductions, capital gains, and a smoother filing experience. For many taxpayers, Budget season isn’t just about numbers—it’s about breathing room in monthly finances.
Budget 2026 Income Tax Expectations: New Regime vs Old Regime Debate
One of the biggest Budget 2026 income tax expectations is clarity on the future of the old tax regime. The government has already made the new tax regime the default, and most taxpayers are shifting because it is simpler and often cheaper.
However, nearly 2 crore taxpayers still prefer the old regime, mainly because deductions like Section 80C, 80D, and home loan benefits still make a major difference.
In Budget 2026, many experts believe the government may not scrap the old regime suddenly—but it could make the new regime so attractive that the old one becomes less relevant over time.
Section 87A Rebate: Will Budget 2026 Extend Zero Tax Further?
Among the most discussed Budget 2026 income tax expectations is the Section 87A rebate. Earlier, the rebate ensured zero tax up to ₹5 lakh. Now, under the new regime, it effectively provides zero tax up to ₹12 lakh (and up to ₹12.75 lakh for salaried individuals after standard deduction).
The middle class is now hoping for one more step forward. A popular demand is extending this benefit to ₹15 lakh, especially because inflation, EMIs, and healthcare costs have increased sharply.
Even if the government doesn’t expand slabs dramatically, a rebate tweak could offer immediate relief without rewriting the entire tax structure.
Standard Deduction Expectations: More Relief for Salaried Taxpayers
Another key part of Budget 2026 income tax expectations is the standard deduction. The new tax regime already enjoys a higher standard deduction of ₹75,000, while the old regime continues at ₹50,000.
Many taxpayers now want parity, or at least an additional increase under the new regime to support salaried households facing rising daily expenses.
If Budget 2026 increases the standard deduction further, it could become one of the simplest and most effective ways to boost take-home income—without introducing complex documentation.
New Tax Regime Deductions: Will NPS, Home Loan & Insurance Come Back?
A major wishlist item under Budget 2026 income tax expectations is the return of popular deductions under the new tax regime. Right now, the new regime works best for people who don’t claim many exemptions. But taxpayers are asking: Can we get the best of both worlds?
There is growing discussion around allowing limited deductions under the new regime, such as:
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NPS deductions (especially additional NPS benefit for retirement planning)
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home loan interest benefits for self-occupied property
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health insurance deductions under Section 80D
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deductions for medical expenses and disability care
Even a partial restoration of these benefits could make the new regime the clear winner for salaried taxpayers and families.
Capital Gains Simplification: A Big Budget 2026 Income Tax Expectation
Investors are closely watching Budget 2026 because capital gains rules have changed frequently in recent years. Whether it’s equity, debt mutual funds, real estate, or indexation benefits, taxpayers want one thing: stability.
A major Budget 2026 income tax expectation is a simplified framework with clearer holding periods, predictable rates, and fewer surprises.
If Budget 2026 reduces confusion in capital gains taxation, it could improve investor confidence and reduce disputes during assessments.
Retirement Tax Relief: EPF, NPS Withdrawals & Pension Income
Retirement planning is becoming a bigger concern across India, and that’s why Budget 2026 income tax expectations include better retirement tax treatment. Taxpayers are looking for clarity and consistency on:
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taxation of EPF withdrawals
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NPS exit and annuity taxation
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pension income relief for senior citizens
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higher benefits for long-term retirement savings
Senior citizens are also hoping for easier compliance, fewer notices, and smoother reporting requirements—especially for pension and interest income.
Faster Refunds & Easier Compliance: The Practical Taxpayer Demand
Beyond slabs and deductions, Budget 2026 income tax expectations also include improving day-to-day taxpayer experience. Many people are frustrated by:
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income tax refund delays
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AIS and Form 26AS mismatches
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TDS/TCS errors
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scrutiny notices and faceless assessment confusion
Taxpayers want faster resolution, fewer disputes, and a system that rewards honest compliance. If Budget 2026 delivers even small improvements here, it could build major trust.
Income Tax Bill 2025 and “Tax Year” Shift: Why It Matters in Budget 2026
The upcoming Income Tax Bill 2025 and the shift to a “Tax Year” concept from FY 2026–27 adds another layer to Budget 2026 income tax expectations. Many taxpayers are hoping this transition leads to:
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simpler ITR filing
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clearer legal language
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reduced litigation
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smoother reporting for salaried and small taxpayers
If Budget 2026 aligns reforms with simplified compliance, it can mark a real turning point.
Will Budget 2026 Deliver Relief or Just Simplification?
Overall, Budget 2026 income tax expectations reflect one clear message: taxpayers want meaningful relief, but they also want predictability. Big tax cuts may be difficult due to fiscal pressure, but smarter rebates, better standard deduction, and selective deductions under the new regime could be realistic solutions.
If Budget 2026 balances simplicity with relief, it could become a strong pro-taxpayer budget—especially for India’s salaried class.
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