Income Tax 2026 Expectations Highlights: Will salaried middle class get further tax relief from FM in Budget 2026?

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Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026 on Sunday, 1 February, while the Budget Session of the Parliament will begin on 28 January 2026 and continue till 2 April 2026.

Check current tax slabs under the new tax regime –

Income up to ₹3,00,000 – Nil

₹3,00,001 to ₹6,00,000 – 5%

₹6,00,001 to ₹9,00,000 – 10%

₹9,00,001 to ₹12,00,000 – 15%

₹12,00,001 to ₹15,00,000 – 20%

Income above ₹15,00,000 – 30%

Check out the income tax slabs for the old tax regime —

Income up to ₹2,50,000 – Nil

₹2,50,001 to ₹5,00,000 – 5%

₹5,00,001 to ₹10,00,000 – 20%

Income above ₹10,00,000 – 30%

“At best, the standard deduction value could be revisited, and old tax regime may continue to be retained,” said Mahesh Krishnamoorthy, Managing Director - Core Integra.

“If Budget 2026 moves toward a simpler New Tax Regime with clear savings incentives, along with GST simplification and sustained spending on infrastructure, green energy and MSMEs, confidence can improve. Predictable policies can help businesses invest in growth, and households can plan better. To sum up, a fair and globally competitive tax system is our aspiration for Budget 2026 which strengthens both growth and long term wealth creation,” said Ram Medury, Founder & CEO, Maxiom Wealth.

“From direct tax perspective, expect it to remain largely same. At best, the standard deduction value could be revisited, and old tax regime may continue to be retained,” said Mahesh Krishnamoorthy, Managing Director - Core Integra.

“Considering the changes done last year in the slab rates and the consequential impact on tax collections, it may not be feasible for the government to make any further changes this year. However, going forward, if the cost-of-living parameters and inflation rates are considered for a default annual tweak in the slab rates in the new tax regime, it may benefit a large section of taxpayers and provide a fillip to further popularising the new tax regime,” Richa Sawhney, Partner, Tax, at Grant Thornton Bharat, told Mint earlier.

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026 on Sunday, 1 February, while the Budget Session of the Parliament will begin on 28 January 2026 and continue till 2 April 2026.

Last year, FM Sitharaman made changes to how TDS (Tax Deducted at Source) works. The TDS limit on rent was raised from ₹2.4 lakh to ₹6 lakh, while the threshold for senior citizens’ interest income was doubled from ₹50,000 to ₹1 lakh.

According to Archit Gupta, Founder and CEO of ClearTax, the budget should “reintroduce the interest deduction benefit (Section 24b) for self-occupied homes in the new regime. Currently, this benefit is available only in the old regime.”

In the 2025 budget speech, the Finance Minister announced that updated ITRs (ITR (U)) can now be filed for a period of up to four years, replacing the previous two-year limit.

As per EY, there is a need to ensure tax certainty for foreign investors. In the absence of clear rules for defining a permanent establishment (PE) and profit attribution, these issues frequently result in litigation. Clear, codified rules will help clarify taxation.

In her budget 2025 speech, Sitharaman announced that zero income tax will be levied on income up to ₹12 lakh, aiming to provide a boost for the middle class. For salaried individuals, the effective tax exemption threshold increased to ₹12.75 lakh after factoring in the ₹75,000 standard deduction. Hence, incomes up to ₹12.75 lakh are now tax-free.

Check out tax slabs under new tax regime

Income up to ₹3,00,000 – Nil

₹3,00,001 to ₹6,00,000 – 5%

₹6,00,001 to ₹9,00,000 – 10%

₹9,00,001 to ₹12,00,000 – 15%

₹12,00,001 to ₹15,00,000 – 20%

Income above ₹15,00,000 – 30%

Check out the income tax slabs for the old tax regime —

Income up to ₹2,50,000 – Nil

₹2,50,001 to ₹5,00,000 – 5%

₹5,00,001 to ₹10,00,000 – 20%

Income above ₹10,00,000 – 30%

EY advised that the government should consider reintroducing accelerated depreciation as a targeted fiscal incentive to boost investment, which should be included within the existing concessional corporate tax regime of 22%/15%, so that higher depreciation does not trigger Minimum Alternate Tax (MAT) for companies.

According to EY, the New Income Tax Act 2025 should be implemented with comprehensive guidelines and FAQs to reduce confusion during the shift from the Income Tax Act, 1961. This is crucial to avoid disputes and ensure a seamless transition for taxpayers.

EY suggested that Budget 2026 should establish a clear roadmap to streamline the TDS rate structure to no more than three or four rates. B2B payments subject to GST could be exempt from TDS, as information about such transactions is already captured in Form 26AS/AIS.

Income Tax remains a key talking point in every Budget, and India Budget 2026 is no exception. Taxpayers, especially the salaried middle class, expect the Budget to bring in benefits. However, given last time's mega boos, the government is unlikely to change anything this time.

Prof Shikha Bhatia, Associate Professor - Finance and Accounting, IMI Delhi: “The upcoming budget should look to provide some benefits to the salaried middle class to reduce household tax burden and increase disposable income while maintaining fiscal prudence. The specific expectations include a further increase in the tax-free slab and an increase in the standard deduction to ₹1 lakh. Simplified compliance for TDS and TCS is highly needed. Additionally, quicker return processing and faster refunds are highly desirable.”

Sumit Gupta, Co Founder at CoinDCX, says, “As we approach Budget 2026, the virtual digital asset sector is naturally looking for measured relief, especially since it has been four years since the current taxation framework was introduced.”

“The decisions taken now can meaningfully accelerate innovation and help India emerge as a global Web3 & VDA leader. The way forward lies in pragmatic reforms that bring users back to compliant platforms while strengthening compliance,” Gupta said.

He added, "A critical first step is ensuring clarity in rules and mandating that all crypto exchanges uniformly implement TDS provisions, which will improve compliance and enhance citizen protection against questionable, non compliant operators through improved adherence to regulations. Reducing TDS from 1% to 0.01% would retain monitoring while removing the primary incentive for offshore migration, encouraging users to return to Indian platforms and restoring transaction visibility under government oversight. Aligning the 30% capital gains tax with income tax slabs, along with allowing loss offsetting and standard business deductions for Web3 ventures, would help create a stable, transparent, and future-ready ecosystem that supports responsible innovation in India.

Here is the view from Gaurav Jain, Partner – Direct Tax, Forvis Mazars in India

“To make the new tax regime more attractive, the government must prioritise certainty, predictability, and disciplined administration. The success of the Income-tax Act, 2025, will depend on the restrained use of powers, decriminalisation of technical and interpretational defaults, and limiting prosecution to cases involving wilful intent or fraud. Improving appellate efficiency through enforceable timelines, refining the faceless appeals mechanism, and ensuring consistent application of settled law will reduce litigation, strengthen taxpayer confidence, and enhance voluntary compliance under the new regime.”

Congress leader K Suresh says, “The budget session will start tomorrow. Tomorrow, the President of India is addressing both houses. On February 1st, the Government of India's Finance Minister will present the general budget... Today, the Government has convened an all-party meeting in the Lok Sabha and Rajya Sabha at 11 AM [today]... As opposition parties, we are raising our voices because there are a number of pro-people issues in the country. We are demanding a discussion of those important and burning issues...”

Pyush Lohia, Director, Lohia Worldspace says, “As India approaches Union Budget 2026, the focus should remain on policy stability, sustained growth, and strengthening consumer confidence amid global uncertainties. Continued rationalisation of personal income tax is expected to ease the burden on the middle class and boost disposable incomes.”

Income Tax remains a key talking point in every Budget, and India Budget 2026 is no exception. Taxpayers, especially the salaried middle class, expect the Budget to bring in benefits. However, given last time's mega boos, the government is unlikely to change anything this time.

Good morning and welcome to Livemint's extensive coverage of Union Budget 2026. With less than 7 days left for Finance Minister Nirmala Sitharaman's speech on 1 February, we bring you the latest news and updates ahead of India's eagerly awaited finance event.