Live Union Budget 2026: Key Highlights & Expectations | Union Budget News

As the Finance Minister, Nirmala Sitharaman, prepares to present the Union Budget 2026 on February 1st, the middle class and salaried taxpayers are buzzing with anticipation. Following the landmark reforms of Budget 2025—which made income up to ₹12 lakh effectively tax-free under the New Tax Regime—all eyes are now on how the government will further simplify the tax code and provide relief against inflation.

Union Budget 2026: Top 5 Income Tax Expectations Every Taxpayer Should Know

The countdown to February 1st has begun. With the Indian economy showing resilient growth despite global headwinds, Budget 2026 is expected to be a balancing act between fiscal consolidation and middle-class relief.

The most significant backdrop to this year’s budget is the upcoming Income Tax Act, 2025, scheduled to take effect from April 1, 2026. This "clean-slate" legislation aims to slash the word count and complexity of tax laws, but taxpayers are hoping for some immediate "sweeteners" before the new Act kicks in.

Here are the top expectations for your wallet:

1. The ₹1 Lakh Standard Deduction Goal

Currently, salaried individuals enjoy a standard deduction of ₹75,000 under the New Tax Regime. However, with the rising cost of living and inflation, there is a strong push from tax experts and industry bodies to increase this limit to ₹1,00,000. This move would provide an immediate boost to the take-home pay of millions of employees.

2. Rationalizing the Highest Tax Slabs

India’s highest effective tax rate (including surcharges) currently sits near 39%. Many experts argue that this is high compared to other developing nations like Malaysia or Vietnam. There is hope that the government might cap the highest tax rate at a more rational 35% to incentivize high earners and keep the personal tax regime in sync with corporate tax rates.

3. Relief for the "Old Regime" Loyalists

While the government has made the New Tax Regime the default choice, nearly 26% of taxpayers still stick to the Old Tax Regime due to long-term commitments like home loans (Section 24b) and life insurance (Section 80C).

• Section 80C: This limit has been stuck at ₹1.5 lakh since 2014. There is a loud demand to hike this to ₹2 lakh or ₹2.5 lakh.

• Home Loans: With interest rates remaining high, first-time homebuyers are hoping for an increase in the interest deduction limit beyond the current ₹2 lakh.

4. Capital Gains: Simplicity and Parity

The current capital gains tax structure is a maze of different rates and holding periods for stocks, real estate, and debt.

• LTCG Relief: Investors are hoping the exemption limit for Long-Term Capital Gains (LTCG) on equities will be raised from ₹1.25 lakh to ₹2 lakh.

• Indexation: There is also a plea to restore indexation benefits for certain asset classes to protect investors from paying tax on "inflationary" gains.

5. Senior Citizen & Healthcare Focus

With medical inflation outstripping general inflation, there is a strong expectation for:

• An increase in the Section 80D limit for health insurance premiums.

• Special tax slabs or higher basic exemption limits specifically for senior citizens under the New Tax Regime, which currently lacks age-based benefits.

The "Nudge" over "Notice"

Beyond the numbers, the Economic Survey 2025-26 highlighted a shift in the government’s approach: "Nudges over Notices." Expect more digital integration, pre-filled tax forms (including capital gains), and faster refund processing. The goal is to make compliance so easy that "inadvertent errors" become a thing of the past.

Final Thoughts

Will FM Nirmala Sitharaman deliver a "feel-good" budget for the middle class, or will the focus remain strictly on infrastructure and fiscal discipline? We will find out at 11:00 AM on Sunday, February 1st.