As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 on February 1, 2026, individual taxpayers are watching with cautious optimism. As the last significant fiscal statement before the new Income-tax Act takes effect on April 1, 2026, this budget is in a unique position to lay the ground for a significant change in India’s direct tax system.
Presented against a backdrop of global economic uncertainty and volatile markets, the budget is expected to prioritize stability. However, the cost-of-living pressure and ongoing inflation have sparked particular demands from India’s middle-class salaried population, who want policies that will boost their net discretionary income.
Key Tax Change Expectations for Individual Taxpayers
Although sweeping structural changes are not expected before a new tax law, experts predict practical, targeted relief to enhance taxpayer experience and allow a smooth transition.
1. Enhancement of the Standard Deduction
Current Status: ₹50,000 (Old Regime) / ₹75,000 (New Regime).
Expectation: An increase to at least ₹1,00,000.
Rationale: This is the most compelling argument for halting the inflation-induced reduction in purchasing power. Salaried workers under all regimes would receive immediate, straightforward assistance from a greater deduction.
2. Rationalized Tax Treatment for Electric Vehicles (EVs)
Current Issue: Engine cubic capacity is the basis for prerequisite valuation for company-leased vehicles; this parameter is meaningless for EVs without conventional engines.
Expectation: Introduction of a separate, favorable valuation mechanism for EVs.
Rationale: To improve tax efficiency for employer-provided EVs, encourage adoption, and align tax policy with broader ESG goals and Make in India.
3. Home Loan Interest Deduction Under the New Tax Regime
Current Gap: The popular Section 24 deduction for interest on self-occupied property is eliminated in the new tax structure, which greatly deters home buyers.
Expectation: Under the new system, self-occupied property is eligible for a home loan interest deduction.
Rationale: To boost confidence in the new regime, support the affordable housing mission, and provide relief to middle-income families amid rising real estate costs.
4. Extended Deadline for Revised/Belated Returns
Current Limit: December 31 of the relevant assessment year.
Expectation: Extension of this deadline.
Rationale: To minimize errors and reduce compliance load for taxpayers with complicated cross-border earnings and delayed foreign tax filings.
The Macro Context: Calibrated Expectations in a Transition Year
Administrative simplification and clearer implementation are expected to take priority for the finance ministry, as the budget avoids major structural changes.
Seamless Transition: Ensuring procedural ease for moving to the new tax code.
Faster Refunds & Simpler Compliance: Leveraging technology to improve the taxpayer interface.
Fiscal Consolidation: Maintaining a path to deficit targets amidst global headwinds.
Bottom Line for Taxpayers: Selective, micro-level reforms in these critical areas remain on the agenda, even though the forthcoming new law has dampened hopes for major tax cuts. Budget 2026 will challenge the government’s ability to balance budgetary discipline with real relief, while also setting the stage for public acceptance of the upcoming Income-tax Act.
