When Finance Minister Nirmala Sitharaman presents the Union Budget on February 1, expectations will once again run high among middle-class taxpayers. This year, the backdrop is different. Unlike earlier years, many taxpayers actually felt the impact of Budget 2025 in their monthly payslips. The Modi government made an income up to Rs 12.75 lakh tax-free under the new regime. The big question now is whether Budget 2026 will extend that relief — or simply consolidate the gains already delivered.
Budget 2025: When tax savings finally became visible
For years, income tax relief often remained theoretical — visible only in calculations, not in cash flows. That changed with Budget 2025, which delivered one of the most substantial overhauls of the new tax regime.
Anita Basrur, Partner at Sudit K Parekh & Co LLP, points out that the most significant relief came through a combination of slab restructuring and higher deductions.
“The most significant tax relief is the increase in the tax-free limit for FY 2025-26 under the new regime up to Rs 12 lakh for resident individuals and additional 75,000 for salaried employees.”
Along with this, the basic exemption limit was raised from Rs 3 lakh to Rs 4 lakh, while the standard deduction for salaried taxpayers increased from Rs 50,000 to Rs 75,000. The restructuring of slabs also meant that the highest tax rate now applies only beyond Rs 24 lakh, compared to Rs 15 lakh earlier.
The combined effect was meaningful. According to Akshay Jain, Direct Tax Partner at NPV & Associates LLP, Budget 2025 marked a clear departure from the previous year.
“On contrary to Budget 2024, Budget 2025 had brought significant relief to middle-class taxpayers by enhancing the basic exemption limit Rs 3,00,000 to Rs 4,00,000 under new tax regime and widening the tax slabs under new tax regime resulting into tax saving up to Rs 1,14,400.”
In addition, the rebate under Section 87A was enhanced to Rs 60,000, effectively ensuring that individuals earning up to Rs 12 lakh paid zero income tax.
How much did individuals really save?
The savings varied across income levels, but for many salaried taxpayers, the difference was tangible. Amit Baid, Head of Tax at BTG Advaya, notes that the relief translated directly into higher take-home pay.
“For the first time in years, tax savings showed up in payslips. Income up to Rs 12 lakh for all individuals and Rs 12.75 lakh for salaried taxpayers has effectively been made tax-free.”
He adds that salaried individuals earning between Rs 10 lakh and Rs 12 lakh could save between Rs 40,000 and Rs 75,000 annually, while those earning around Rs 20 lakh could see savings of about Rs 1.3 lakh, depending on deductions. Beyond numbers, this provided psychological relief at a time of rising EMIs, education costs, and household expenses.
Budget 2026: Big tax cuts unlikely, expectations turn selective
With such a significant reset already done, experts broadly agree that Budget 2026 is unlikely to deliver another round of sweeping slab changes.
Richa Sawhney, Partner, Tax at Grant Thornton Bharat, believes the government has little room — or need — to tinker further with slabs.
“We don’t really foresee any significant changes in this year’s budget, for salaried classes, considering the overhaul of slabs rates done last year in the new tax regime.”
She also notes that more than 75% of taxpayers had already moved to the new regime even before the slab rejig, and that number is expected to have increased sharply since Budget 2025.
What taxpayers are realistically hoping for
While large slab changes may be off the table, expectations for targeted relief remain strong.
Anita Basrur highlights that salaried taxpayers are hoping for further improvement in standard deduction.
“Increased Standard Deduction to Rs 1 lakh”
She also flags expectations around raising the income threshold for the 30% tax bracket from Rs 24 lakh to Rs 35 lakh, easing surcharge rates, and making the new regime more practical by allowing deductions such as mediclaim and housing loan benefits.
Akshay Jain adds that expectations now extend beyond rates and slabs. With the Income-tax Act, 2025 coming into force from April 1, 2026, clarity on transition, compliance timelines, and dispute resolution has become crucial.
“With New Income Tax Act coming into force, we expect simplified reforms, enhanced taxpayer services and experience, reduced disputes, speedy redressal of CIT Appeals and less harassment during scrutiny assessment.”
There is also growing demand for higher standard deduction — ideally up to Rs 1 lakh — and rationalisation of TDS and TCS rates to improve cash flows.
Capital gains, old regime users, and new ideas
Some expectations go beyond salaried income. Jain notes that while slab changes may not happen, there is hope that capital gains income could be included within the Rs 12 lakh rebate threshold to ease the burden on small investors.
Taxpayers still using the old regime are also seeking relief — including higher deductions for home loan interest and National Pension System (NPS) contributions.
Another emerging idea gaining traction is joint taxation for married couples. Proposals include optional joint filing, tax neutrality between single and dual-income households, and intra-family loss set-offs — a system followed in several global economies.
The real relief may be administrative, not numerical
Amit Baid sums up the broader sentiment succinctly. According to him, the middle class may not see dramatic tax cuts in Budget 2026 — but that may not be the real need.
“For the middle class, the biggest relief may not come from lower rates, but from a tax system that works smoothly and reliably.”
As Budget Day approaches, taxpayers seem to be recalibrating expectations. After the meaningful savings delivered in Budget 2025, the hope now is for stability, smoother compliance, faster refunds, and a tax system that feels predictable — even if headline-grabbing tax cuts remain elusive.