In about three months from now, the Modi government will present in Parliament its third Union Budget of its third term. In any Budget presentation, one of the most awaited parts of the Finance Minister’s speech for people is the section where the FM talks about tax measures, especially personal income tax relief.
In every Budget, the government tries to align its tax policies with the economic realities of the country. Tax is the main source of revenue for any government to carry out development projects for people and to spend on education, healthcare, and welfare measures.
Union Budget 2026-27
The Union Budget for 2026-27, to be presented on February 1, 2026, is already in motion. The Finance Ministry has invited suggestions from trade and industry on changes to the direct and indirect tax structure, asking for proposals on rate rationalisation and compliance simplification.
In its customary pre-Budget communication, the Tax Research Unit (TRU) under the Revenue Department said suggestions must reach the ministry by November 10. The circular mentions that proposals should include “economic justification, relevant data, and revenue implications,” underscoring the government’s aim for a well-balanced and evidence-driven Budget.
But while the formal call is to industry, the country’s crores of taxpayers also have expectations of their own. This budget is also important because it’s the last full Budget before the new Income Tax Act, 2025, comes into force from April 1, 2026. , replacing the six-decade-old law.
Considering the tax-related reforms, the last two budgets have been quite exceptional, especially the last one which saw the government increasing the limit for tax-free income to Rs 12 lakh under the new tax regime – one of the biggest reliefs taxpayers have seen probably in many decades. With this, the basic exemption limit also increased to Rs 4 lakh under the new regime. Before that in the Union Budget 2024 (in the July budget after the NDA returned to power for the third term), there were some major changes and the prominent one was related to capital gains taxation.
Last Budget (2025) gave big relief but only under the new regime
Some landmark changes for individuals under the new tax regime in the FY 2025-26 Budget:
-Tax-free income up to Rs 12 lakh after rebates under Section 87A.
-Revised tax slabs with lower rates up to Rs 24 lakh annual income.
-Standard deduction of Rs 75,000 for salaried taxpayers.
-Simplified filing and refund process in the faceless regime.
However, the old tax regime — still preferred by many salaried taxpayers — was left untouched. No changes were made to popular deductions under Section 80C (Rs 1.5 lakh) or 80D (medical insurance).
That’s why expectations for Union Budget 2026-27 are now centred on parity, predictability, and genuine relief for middle-class taxpayers, balancing rising costs with stagnant exemption limits.
What taxpayers would like to see in Budget 2026–27
Here’s what, according to us, taxpayers would like to see in next year’s Budget — which will be presented just before the new Income Tax Law comes into effect on April 1, 2026.
These are some of the expectations and hopes individuals have from the upcoming Budget, based on emerging trends, expert suggestions, and common taxpayer sentiment.
- Old Tax Regime taxpayers expect some relief
Those under the old regime are hoping for a higher basic exemption limit (currently Rs 2.5 lakh) and revised slabs to align with the new tax regime. A hike in the 80C deduction limit to Rs 2 lakh would help taxpayers manage savings, insurance, and children’s education costs more comfortably.
Despite the government’s efforts to promote the new regime, many salaried and middle-income individuals still prefer the old one because of deductions available on EPF, home loan interest, tuition fees, and insurance.
Taxpayers expect the government to revise rates, simplify deductions, or offer incentives for a smoother transition to the new system. The upcoming Income Tax Act 2025 could provide an opportunity to rationalise both regimes into a single, simplified structure.
- Simplified compliance and early refunds under new tax law
One of the biggest pain points over the years has been compliance — filing returns, matching TDS, and waiting for refunds for months. The new Income Tax Bill, effective April 1, 2026, promises to simplify this. It will replace the concept of “assessment year” with “tax year”, reduce the number of sections, and allow refunds even for delayed filings.
Taxpayers hope the 2026 Budget will set the tone for this transition and introduce smarter, easier e-filing systems and ensuring faster refund timelines, especially for salaried employees.
- More deductions for homebuyers, medical costs, and senior citizens
The cost of living, housing, and healthcare have all risen sharply in recent years. Deductions against such expenditures are not allowed under the new tax regime and taxpayers want the government to give at least some deduction benefits under the new regime, considering the high cost of living. Taxpayers under the old regime are also seeking an increase in deduction limits for home loan interest (currently Rs 2 lakh) and medical insurance (Rs 25,000 for individuals, Rs 50,000 for senior citizens).
Senior citizens, in particular, would like to see higher savings interest exemption limits, simplified compliance for pensioners, and continued exemption on Senior Citizen Savings Scheme (SCSS) interest.
4. Rationalisation of capital gains tax
Capital gains rules remain complex and fragmented. Taxpayers want a uniform capital gains tax structure across asset classes — equity, debt, real estate, and mutual funds — with simplified holding period definitions.
5. Clarity in digital asset taxation
Further, with growing investments in digital assets and global income, clarity on taxation of foreign assets, crypto holdings, and ESOPs is expected under the new tax regime.
Transition to the new Income Tax Act from April 2026
The Income Tax Act, 2025, approved by Parliament earlier this year, will come into effect from April 1, 2026. It aims to simplify and modernise India’s 60-year-old tax law.
Key features include:
-Simpler language and fewer sections (down from 800+ to around 500).
-Replacement of “assessment year” with “tax year”.
-Refunds allowed even on late returns.
-Continuation of existing exemptions for home loan and rental income.
-Provisions for digital and global income reporting.
This transition will be one of the biggest overhauls in India’s tax system since 1961. The upcoming Budget will therefore act as a bridge and will prepare taxpayers and systems for the change ahead.
What taxpayers expect this Budget to deliver
In essence, individual taxpayers are not merely looking for rate cuts—they want a fair, simple, and transparent system. Their wishlist from Budget 2026 includes higher tax-free limit or rebate under both regimes; rationalisation of deductions and exemptions; simpler filing and faster refunds; higher medical and housing relief; clear roadmap for new Income Tax Act 2025 rollout; and predictable GST and indirect tax structure.
As the government prepares to finalise its proposals, the Finance Minister faces a familiar challenge, i.e. balancing fiscal prudence with taxpayer relief. But given the upcoming implementation of a new tax law, this Budget could set the tone for a more predictable, citizen-friendly tax environment in the years to come.