For India’s vast segment of salaried employees earning under ₹60,000 per month, Union Budget 2026 is expected to reinforce their current zero-tax status while potentially enhancing disposable income through key deductions. For this income category, the New Tax Regime’s inflation-adjusted reliefs would be the main focus of Finance Minister Nirmala Sitharaman’s budget presentation on February 1.
What Is the Current Tax Status for These Earners?
Employees with an annual income of approximately ₹7.2 lakh (₹60,000 monthly) currently enjoy effectively zero tax liability under the New Tax Regime established in the previous budget. This is accomplished through two mechanisms: the Standard Deduction of ₹75,000, which reduces taxable income to ₹6.45 lakh, and the Section 87A rebate, which offers complete tax relief for net taxable income of up to ₹12 lakh. Income up to ₹12.75 lakh, including the standard deduction, is tax-free.
What Are the Key Budget Expectations for This Group?
While structural slab changes are doubtful following last year’s revision, particular adjustments are expected to handle rising living costs and streamline compliance. The Standard Deduction is expected to be increased from ₹75,000 to ₹1 lakh, resulting in a direct rise in monthly salary. There is also a significant movement to include restricted deductions for health insurance (Section 80D) and home loan interest (Section 24b) in the New Tax Regime, which are now only available under the Old Regime. In addition, taxpayers want Tax Deducted at Source (TDS) reduced to fewer, simpler rates in order to optimize monthly cash flow.
Could Retirement Savings Get a Boost?
Experts see the National Pension System (NPS) as a potential area for reform to support long-term savings. The ₹50,000 tax deduction under Section 80CCD(1B), currently restricted to the Old Regime, is expected to be made available under the New Tax Regime. This change would encourage salaried employees to secure their retirement while cutting taxable income.
How Do These Expectations Compare to the Last Budget?
The demands for 2026-27 represent an evolution from the foundational benefits established in Budget 2025-26.
Then (Budget 2025-26): The New Regime was appealing for its simplicity and refund, but it lacked fundamental deductions.
Now (2026-27 Expectation): The focus is on enhancing the value of that ceiling by raising the Standard Deduction amount itself, not the slab thresholds.
Then: The New Regime was appealing because to its simplicity and refund, but it missed key deductions.
Now: Active demands exist to populate the New Regime with specific, high-utility deductions such as 80D and 24b, elevating it from easy to comprehensively advantageous.
Then: TDS structures remained complex, with numerous rates.Now: There is a clear desire for simplification to 1% and 5% rates, addressing a long-standing issue with monthly wage processing.
Disclaimer: The opinions and suggestions of the industry are reflected in the article above. The Finance Minister’s address tomorrow will confirm the final budgetary decisions and policy pronouncements.
