Salaried taxpayers are hoping for higher standard deduction, possible TDS relief, and more income tax benefits in Union Budget 2026 after last year’s tax cuts
Budget 2026 Key Income Tax Demands of Salaried Employees
Union Budget 2026: Finance Minister Nirmala Sitharaman will present her ninth straight Union Budget tomorrow, and people across India from individuals to industries are hoping for benefits. After taxpayers received major relief last year, the middle class and salaried employees are now expecting further income tax reductions in the India Budget 2026.
In the Union Budget 2025, the Finance Minister gave significant relief by removing income tax on annual earnings up to ₹12 lakh. For salaried individuals, this limit effectively became ₹12.75 lakh because of the ₹75,000 standard deduction.
Income tax has always been one of the most discussed parts of the Budget. Middle-class families and salaried workers closely watch it each year, hoping for measures that lower their tax burden.
With only one day left before the India Budget 2026 on Sunday, 1 February, experts and taxpayers have shared their expectations.
Salaried individuals want the standard deduction to be increased in the 2026 Budget. At present, the standard deduction in the new tax regime is ₹75,000. Many believe it may be raised to ₹1 lakh, which would make income up to ₹13 lakh tax-free.
There are also expectations that the government will simplify and rationalise TDS (Tax Deducted at Source).
Under the old tax regime:
Income up to ₹2,50,000 – No tax
₹2,50,001 to ₹5,00,000 – 5%
₹5,00,001 to ₹10,00,000 – 20%
Income above ₹10,00,000 – 30%
Income up to ₹3,00,000 – No tax
₹3,00,001 to ₹6,00,000 – 5%
₹6,00,001 to ₹9,00,000 – 10%
₹9,00,001 to ₹12,00,000 – 15%
₹12,00,001 to ₹15,00,000 – 20%
Income above ₹15,00,000 – 30%
The main difference between the two systems is in the slab structure. The old regime has fewer slabs, while the new regime divides income into more categories, which reduces tax pressure for many taxpayers.
However, the old regime allows more deductions. Taxpayers can claim several deductions there. In contrast, the new regime offers only limited deductions, such as those for NPS investments.
In Budget 2025, FM Sitharaman reduced income tax on earnings up to ₹12 lakh, which benefited millions of middle-class taxpayers by making this income tax-free. For salaried people, the tax-free income under the new regime rose to ₹12.75 lakh after including the standard deduction. She also announced the New Income Tax Act, 2025, which will take effect from 1 April.
Experts believe that the government may not change the income tax slabs in Union Budget 2026. Still, there is strong hope for changes related to TDS and the standard deduction.
