Budget 2026 Income Tax Expectations: What Salaried Class Hopes From FM Sitharaman
As the Union Budget 2026 approaches, salaried taxpayers, the middle class, and common citizens across India will once again tune in to Finance Minister Nirmala Sitharaman's speech with hopeful anticipation for tax relief measures. This annual ritual reflects the collective desire for financial ease amid economic pressures.
Last year, FM Sitharaman introduced significant modifications to the new income tax regime, sparking discussions about future adjustments. While tax experts caution that fiscal constraints might limit major overhauls in Budget 2026, there remains optimism that targeted changes could be implemented to stimulate consumption and provide relief to taxpayers.
Top 5 Income Tax Expectations from Union Budget 2026
What do salaried taxpayers, the middle class, and the common man specifically desire from Union Budget 2026 regarding income tax? Here is a detailed look at the top five expectations that are dominating discussions.
Income Tax Slabs for FY 2026-27 and Rebate Under Section 87A
Currently, the income tax slabs under the new tax regime are structured as follows:
- Income up to Rs 4 lakh is exempt from tax, establishing the basic exemption limit at Rs 4 lakh. Many taxpayers advocate for this limit to be increased further to alleviate compliance burdens.
- Income falling within the Rs 4 lakh to Rs 8 lakh bracket is subject to a 5% tax rate.
- The Rs 8 lakh to Rs 12 lakh bracket attracts a 10% tax rate.
- Income ranging from Rs 12 lakh to Rs 16 lakh is taxed at 15%, escalating to 20% for earnings between Rs 16 lakh and Rs 20 lakh.
- Those earning between Rs 20 lakh and Rs 24 lakh face a 25% tax rate.
- Any income exceeding Rs 24 lakh is taxed at the highest slab rate of 30%. Salaried taxpayers are particularly keen on seeing the threshold for the 30% tax bracket raised to Rs 30 lakh.
Presently, income up to Rs 12 lakh (or Rs 12.75 lakh for salaried taxpayers) remains tax-free after utilizing the rebate under Section 87A. Tax experts suggest that this limit could be elevated to Rs 15 lakh to provide broader relief.
Additionally, numerous taxpayers continue to file returns under the old income tax regime. They urge the government to reduce tax rates and increase the basic exemption limit within that framework as well.
Standard Deduction Adjustments
The standard deduction limits vary between the old and new income tax regimes. Under the old regime, taxpayers benefit from a Rs 50,000 standard deduction, whereas the new regime offers a higher deduction of Rs 75,000. Tax experts argue that there is a compelling case to hike the standard deduction limit, especially under the new tax regime, which provides fewer deductions and exemptions overall.
Home Loan Interest Benefits
Individual taxpayers can claim tax deductions on home loan interest under the old income tax regime. Specifically, the interest paid on a home loan for a self-occupied residential property can be deducted from taxable income, up to ₹2 lakh per year (or the actual interest paid if lower). To foster growth in the housing sector, tax experts recommend extending this benefit to the new tax regime as well.
Section 80C Enhancements
Section 80C is a widely utilized exemption under the old income tax regime, covering investments in Provident Fund, Public Provident Fund (PPF), mutual funds, and other popular options. However, its limit of Rs 1.5 lakh has remained stagnant for many years. Tax experts believe that to incentivize savings, it is crucial not only to increase this limit but also to incorporate this exemption benefit into the new income tax regime, thereby encouraging broader adoption.
Tax Filing Compliance Simplification
While the government has emphasized easing income tax return filing processes, taxpayers feel that e-filing could be made more user-friendly. The tax compliance mechanism, grievance redressal system, and handling of tax queries related to discrepancies in the Annual Information Statement (AIS), Form 16, and Form 26AS need to be streamlined and less complicated, according to tax experts.
As Budget 2026 draws nearer, these expectations highlight the ongoing dialogue between taxpayers and policymakers, underscoring the need for balanced fiscal measures that support both economic growth and individual financial well-being.
