As the Union Budget 2026 approaches, salaried individuals across India are closely watching for announcements that could impact their tax burden. The central government is set to present the Union Budget on Sunday, February 1, 2026, at 11:00 AM in Parliament. Once again, income tax proposals are expected to be among the most discussed aspects of the budget, especially for the salaried middle class.

Experts believe that Budget 2026 may focus on boosting consumption, simplifying the tax system, and widening the tax base. While a large, headline-grabbing tax cut may be unlikely, several practical and incremental changes could still provide meaningful relief to salaried taxpayers. Here are the 10 major income tax expectations from Budget 2026 that salaried individuals should be aware of.

1. Limited Relief in Income Tax Slabs

According to tax experts, significant changes in income tax slabs are unlikely in Budget 2026, mainly because major revisions were already introduced in the previous budget. However, there is a strong expectation that slabs could be adjusted for inflation. As salaries rise nominally, inflation often erodes real purchasing power, pushing taxpayers into higher slabs without an actual increase in disposable income. Even a modest inflation-linked adjustment could offer relief.

2. Increase in Standard Deduction

Under the new tax regime, the standard deduction currently stands at ₹75,000, last revised in the 2024 budget. With rising living costs, there is growing demand to increase this limit. Any enhancement in standard deduction would directly raise disposable income for salaried employees and pensioners, making it one of the most anticipated announcements.

3. Simplification of the TDS System

The existing Tax Deducted at Source (TDS) framework involves multiple rates across different transactions, making compliance complex. Experts expect the government to rationalize TDS rates, possibly reducing them to two or three standard rates. This could ease compliance for both taxpayers and employers while improving overall efficiency.

4. Old Tax Regime Likely to Continue

Although the government has indicated a long-term preference for the new tax regime, the old tax regime is still popular among taxpayers who benefit from deductions and exemptions. In Budget 2026, the complete removal of the old regime appears unlikely. Instead, a gradual and phased approach may be adopted to avoid disruption.

5. Further Reforms in Tax Administration

The government has made progress in digitizing tax assessments and increasing transparency. However, delays in dispute resolution and appeals remain a challenge. Budget 2026 may introduce measures to speed up assessments, appeals, and dispute resolution, making the tax administration more taxpayer-friendly.

6. Higher Deduction on Home Loan Interest

Currently, Section 24(b) of the Income Tax Act allows a maximum deduction of ₹2 lakh on home loan interest for self-occupied properties. This limit was set nearly a decade ago and has not kept pace with rising property prices. Many expect Budget 2026 to increase this cap, offering relief to homeowners and boosting the housing sector.

7. Further De-criminalization of Income Tax Laws

In recent years, the government has taken steps to remove criminal liability for certain technical defaults. Budget 2026 may continue this trend by de-criminalizing more minor and procedural violations, reducing fear and uncertainty among honest taxpayers.

8. Clarity on Capital Gains Tax in Complex Transactions

Capital gains taxation, particularly in cases involving mergers and acquisitions (M&A) and contingent consideration, remains unclear. Experts hope Budget 2026 will provide clearer rules, making tax calculations more predictable and reducing litigation.

9. Revised Perquisite Rules for Electric Cars

Currently, perquisite valuation for employer-provided cars is based on engine capacity, which does not suit electric vehicles (EVs). With EV adoption rising, Budget 2026 may introduce separate perquisite valuation norms for electric cars, making them more attractive for employers and employees alike.

10. Incentives for Job Creation Under Section 80JJAA

To encourage employment generation, the government may enhance benefits under Section 80JJAA, which allows deductions for costs related to new employee hiring. Increasing these incentives could motivate companies to expand their workforce, aligning with the government’s focus on job creation.

What This Means for Salaried Taxpayers

While Budget 2026 may not deliver sweeping tax cuts, it has the potential to introduce targeted reforms that improve tax efficiency, reduce compliance burdens, and provide incremental relief to salaried individuals. Measures aimed at simplifying taxes, supporting homebuyers, encouraging EV adoption, and boosting employment could collectively strengthen middle-class confidence.

As expectations remain realistic rather than exaggerated, Budget 2026 has an opportunity to quietly but effectively address long-standing concerns of salaried taxpayers—without disrupting fiscal discipline.

Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Readers are advised to consult a certified tax professional before making any financial decisions.