Income Tax 2026 Expectations Highlights: Will FM Sitharaman give another boost to taxpayers in Budget 2026?

As India prepares for the Union Budget 2026, to be presented on February 1st, taxpayers are keenly anticipating potential changes to income tax regulations. Following a significant overhaul of the new tax regime in Budget 2025, which specifically benefitted the middle class, expectations are once again high for adjustments that could impact personal finances.

Budget Expectations for Salaried Employees

Salaried employees are particularly focused on a possible increase to the standard deduction, currently set at ₹75,000 under the new tax regime. This deduction was previously raised from ₹50,000 to ₹75,000. There is also hope for rationalization of Tax Deducted at Source (TDS) procedures.

Understanding the Income Tax Slabs

The current income tax slabs differ between the old and new tax regimes. Under the old regime, income up to ₹2,50,000 is exempt, followed by 5% on income between ₹2,50,001 and ₹5,00,000, 20% on income between ₹5,00,001 and ₹10,00,000, and 30% on income above ₹10,00,000.

The new tax regime features different brackets: up to ₹3,00,000 is exempt, followed by 5% on income between ₹3,00,001 and ₹6,00,000, 10% on income between ₹6,00,001 and ₹9,00,000, 15% on income between ₹9,00,001 and ₹12,00,000, 20% on income between ₹12,00,001 and ₹15,00,000, and 30% on income above ₹15,00,000.

Old vs. New Regime: Key Differences

The primary distinction between the two regimes lies in the tax slabs. The new tax regime categorizes income into more segments, potentially lowering the tax burden for many. However, the old regime allows for a wider range of deductions, such as investments in the National Pension System (NPS), which are limited under the new regime.

Impact of Budget 2025

Last year’s budget provided a substantial benefit to Indian taxpayers by reducing income tax on earnings up to ₹12 lakh, positively impacting millions in the middle class. The non-taxable income limit under the new tax regime increased to ₹12.75 lakh after applying the standard deduction.

While experts suggest significant changes to income tax slabs are unlikely in the upcoming budget, attention remains focused on potential adjustments to TDS and standard deductions. There are also broader from other sectors.

Taxpayers can determine their income tax liability for FY 2025-26 (AY 2026-27) by inputting their income details and selecting their preferred tax regime. The provides a convenient tool for this calculation.