Budget 2026: No big-bang cuts but some relief likely for salaried class

Tax experts say the Centre is expected to strengthen the new tax regime through slab rationalisation and higher rebates rather than expanding deductions

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026–27 on February 1, with expectations running high among salaried taxpayers. Tax experts say the government is expected to stay the course on the new income tax regime, focusing on slab rationalisation and a higher effective tax-free threshold rather than widening deductions.

 

“Budget 2026 is unlikely to announce big-bang tax cuts, but it can still deliver meaningful relief,” said Brajesh Pranami, founder and chief executive of Fly Hi Financial Services Limited (Flyhi Finance), in a conversation with Business Standard.

 

Ketan Mukhija Partner and Co - Head, PE & VC, Kochhar & Co, shared a similar view. “The government’s direction appears to be to make the new regime decisively more attractive, potentially through a higher basic exemption, an enhanced rebate, and selective slab relief in the middle-income bands, say ₹8–₹20 lakh, to boost disposable income,” he said.

 

 

With household consumption under strain, even calibrated relief could lift sentiment. “This Budget is more about restoring confidence than offering giveaways,” Pranami said.

 

Will Budget 2026 move to a single income tax regime?

 

A complete shift appears unlikely in the near term.

 

“A complete move to a single regime seems unlikely immediately, but the glide path will continue through measures like keeping the new regime as the default and simplifying choices, while the old regime remains for taxpayers who rely heavily on deductions,” said Mukhija.

 

Pranami also expects both regimes to continue. “A sudden shift to a single tax regime would be disruptive, so dual regimes are likely to continue in Budget 2026,” he said.

 

“However, the direction is clear — the new regime will increasingly be positioned as the default through simplicity and incremental advantages. Rather than forcing change, the government is nudging behaviour, allowing taxpayers to transition naturally over time,” he added.

 

What kind of relief could be in the pipeline?

 

Experts say there is room for targeted relief, especially for salaried taxpayers.

 

“There is scope for additional relief for salaried taxpayers, most cleanly via standard deduction changes, since it is administratively simple and broad-based, though the government will calibrate such relief to avoid revenue slippage,” said Mukhija.

 

He added that sweeping changes to popular deductions remain improbable. “Major changes to deductions such as 80C, housing loan benefits, insurance, or retirement savings appear less likely. The long-term approach seems to be reducing dependence on deductions by improving rates under the simplified regime.”

 

According to him, middle-income households can realistically expect relief through slabs or rebates rather than new exemption-heavy tax planning. “Any additional benefits may be targeted, such as for senior citizens, pensioners, or first-time or low-ticket taxpayers,” he said.

 

On the administrative side, Pranami pointed to process reforms. “Expanding pre-filled returns and near-automatic filing for salaried and small taxpayers can significantly improve compliance without tougher enforcement,” he said.

 

“When systems are simple, participation rises organically. In financial services, we see this clearly — simpler processes drive better outcomes, and the same logic applies to income tax,” he added.

 

Affordable housing still on the wishlist

 

Housing-related relief continues to be a key demand among middle-class taxpayers, particularly as property prices and construction costs rise.

 

“For the middle class, affordable housing has become a means to an end, and that end is really attaining sustainability,” said Vijay Raundal, managing director at Teerth Realties.

 

He said expectations from the Budget include:

 

• Faster approvals for affordable housing projects

• Greater focus on mass housing

• Better infrastructure in peripheral areas to improve liveability

• Policies supporting rental housing schemes

• Renewal programmes for ageing housing stock

• Joint public-private initiatives to increase supply without compromising quality

 

“An effective Budget that recognises social infrastructure alongside physical assets has a direct bearing on one of the most pressing demands of India’s middle class,” Raundal said.