Union Budget 2026-27 Tax Expectations are exceptionally high this time because this Budget will be the last full Budget presented before the new Income Tax Act, 2025 becomes operational from April 1, 2026. This Budget is not just another annual announcement — it will be a transition Budget that prepares taxpayers, professionals, systems, and industries for the biggest tax law shift India has seen in 60 years.
The Finance Ministry has already begun its pre-budget process, inviting tax proposals from trade and industry associations, with a deadline for submission till November 10, 2025. While industry is sharing sectoral recommendations on direct tax and indirect tax structures, individual taxpayers have their own strong wish list from the Union Budget 2026-27.
Below are the top 5 major Union Budget 2026-27 Tax Expectations that taxpayers are consistently hoping the government prioritizes this year.
1. Relief for Personal Income Taxpayers Under the Old Regime
In the last Budget, the government provided massive relief under the New Tax Regime — including tax free income up to ₹12 lakh after rebates and revised slabs up to ₹24 lakh. However, the Old Regime was completely left untouched. Most middle-class salaried individuals still continue to use the old regime because they find benefit in deductions related to home loan interest, EPF, school tuition fees, life insurance premiums and other exemptions available under Chapter VIA.
Therefore, taxpayers Union Budget 2026-27 Tax Expectations the government to do the following:
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Increase 80C limit from ₹1.5 lakh to ₹2 lakh
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Increase basic exemption limit from ₹2.5 lakh to at least ₹3 lakh or ₹3.5 lakh
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Provide some form of deduction support even under the New Regime considering rising expenses
This would create parity between both tax systems and also enable gradual transition.
2. Simplified Compliance and Faster Refund Mechanism
Another major Union Budget 2026-27 tax expectation is simpler compliance. Taxpayers have been consistently facing refund delays, TDS mismatches, portal instability and manual error-based scrutiny notices. The new Income Tax Act promises a reduced number of sections, simpler language, faster refunds and reduced assessment complexities.
Union Budget 2026-27 Tax Expectations to:
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Introduce AI-based automated matching for TDS
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Enable refund release within 15–30 days for salaried taxpayers
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Reduce faceless scrutiny timelines
If implemented, this will reduce litigation, reduce stress for professionals and improve voluntary compliance drastically.
3. Higher Deduction Benefits For Homebuyers, Medical, and Senior Citizens
India’s cost of living has increased drastically and Union Budget 2026-27 Tax Expectations to recognize this. Housing EMIs, medical premiums, treatment costs and parent care challenges have risen significantly in the last few years. Therefore, Union Budget 2026-27 Tax Expectations:
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Increase home loan interest deduction (currently ₹2 lakh) to at least ₹3 lakh
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Increased 80D medical insurance limit
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Special higher deduction limit for senior citizens beyond SCSS interest exemption
Budget 2026 could strongly support urban middle class families just by improving these deduction caps.
4. Rationalization of Capital Gains Tax System
Capital gains tax is currently one of the most confusing areas for individual taxpayers. Different holding periods, different rates, different indexation rules and different eligibility based on asset category makes it highly complex. One of the top Union Budget 2026-27 tax expectations is a uniform, rational and simpler capital gains regime.
A single capital gains structure, common holding period classification and simplified tax rate slabs across equity, debt, gold, property and mutual funds is expected this year.
5. Clear Rules on Global Income and Digital Assets
With rising investments in crypto, foreign equities, remote work incomes, freelancing billing from overseas and stock options from global companies, taxpayers want clear and transparent taxation rules. Union Budget 2026-27 Tax Expectations to define tax treatment under the new law to avoid ambiguity, especially ahead of the large Income Tax Act implementation.
Union Budget 2026-27 is not a routine Budget — it will act as the bridge between the existing law and the new Income Tax Act framework. Taxpayers want this Budget to bring fairness, predictability and simpler compliance rather than only focusing on rate cuts. With cost of living rising rapidly, taxpayers expect relief across both Old and New regimes, clarity in capital gains taxation, and faster refunds.
If the government meets even 50% of these expectations, Budget 2026 could become one of the most impactful Budgets for the middle class in the last decade.
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