Taxpayers Eye Budget 2026 for Further Relief After Last Year's Cuts
Finance Minister Nirmala Sitharaman will announce Budget 2026 in just a few days. Taxpayers across India are watching closely. They hope for more income tax reliefs. This follows the Centre's bumper tax rate cuts last year. Those cuts aimed to boost consumption.
Budget 2025: A Boon for Taxpayers
Budget 2025 brought several key announcements. These announcements benefited taxpayers and salaried individuals. The middle class saw many demands fulfilled. Here are five major income tax changes from that budget.
1. Income Tax Rate Cut
Nirmala Sitharaman made a surprise announcement. She exempted income tax for those earning up to ₹12 lakh. This move boosted the middle class. For salaried people, the exemption increased to ₹12.75 lakh. This figure includes ₹75,000 from the standard deduction. Incomes up to ₹12.75 lakh became tax-free.
2. New Tax Slabs
Sitharaman introduced new slab rates under the new tax regime. The rates are as follows:
- ₹0 – ₹4 lakh: No Tax
- ₹4 lakh – ₹8 lakh: 5%
- ₹8 lakh – ₹12 lakh: 10%
- ₹12 lakh – ₹16 lakh: 15%
- ₹16 lakh – ₹20 lakh: 20%
- ₹20 lakh – ₹24 lakh: 25%
- ₹24 lakh and above: 30%
3. New Income Tax Bill
The Finance Minister announced the New Income Tax Bill, 2025. The Lok Sabha later passed it. The New Income Tax Act, 2025, will take effect from 1 April this year. It simplifies language, removes obsolete provisions, and streamlines sections. This creates a simpler version for taxpayers.
4. TDS Rate Cut
Sitharaman made several changes to TDS (Tax Deducted at Source). The TDS on rent limit increased from ₹2.4 lakh to ₹6 lakh. This reduces compliance for small landlords. The threshold for senior citizens' interest income doubled. It went from ₹50,000 to ₹1 lakh.
5. ITR(U) Relief
The Finance Minister announced another relief. Updated ITRs (ITR (U)) can now be filed for up to four years. Earlier, the limit was two years. This gives taxpayers more time to update their income tax returns.
Budget 2026: What Can Taxpayers Expect?
After Budget 2025, taxpayers now look to Budget 2026. They seek more relief on income tax rules. However, experts do not anticipate major announcements on direct taxes.
Richa Sawhney, Partner, Tax, at Grant Thornton Bharat, shared her view. She said changes last year impacted tax collections. Further changes may not be feasible this year. But future tweaks could consider cost-of-living and inflation. This would benefit many taxpayers. It could also popularise the new tax regime.
Nishant Shah, Partner at Economic Laws Practice, expects smoother implementation. He highlighted expectations for Budget 2026. A key focus is broader tax certainty for foreign investors. Smoother implementation of the new Income-tax Act, 2025, is also expected.
The government is examining a proposal. It may exempt sovereign wealth funds from tax on equity gains. This would expand current exemptions. The aim is to reverse recent FPI outflows. It seeks to attract long-term, stable capital.
Key Takeaways
- Budget 2025 introduced significant income tax cuts and new slabs. These benefited middle-class taxpayers.
- Taxpayers hope for additional relief in Budget 2026. Experts predict limited changes.
- Foreign investment incentives are a focus. They could impact future tax policies.
