Income Tax Changes Expected in Budget 2026: Middle Class Hopes for Big Relief

Income Tax Changes in Budget 2026: Millions of taxpayers in India are eagerly awaiting the Union Budget 2026. As soon as the word "budget" comes up, the first question that pops into mind is, "What changes will there be in income tax?" Middle-class and salaried taxpayers, in particular, are hoping for some relief in income tax this time. Amidst inflation, rising EMIs, and increasing daily expenses, the demand for changes in the tax structure has intensified. As every year, the common man's eyes are on Budget 2026. Whether they are salaried individuals, middle-class families, senior citizens, or investors, everyone is hoping for some tax relief.

Finance Minister Nirmala Sitharaman will present her ninth consecutive budget on February 1st, and this will be the full budget of the Modi government's third term. Therefore, people believe that the tax system can be further simplified this time to directly benefit the common man.

Let's find out what benefits common taxpayers can expect from Budget 2026.

The Biggest Expectation Regarding Income Tax in Budget 2026

In the last few years, significant changes have been made to the new tax system, and now income up to Rs 12.75 lakh is tax-free. This raises the question in people's minds: what further relief will be provided? Salaried individuals hope that the government might gradually try to phase out the old tax system, but many still rely on deductions like 80C, 80D, and home loan exemptions.

Demand to End Confusion Between New and Old Tax Systems

Even today, many taxpayers are confused about whether to choose the new tax system or the old one. The new system is simpler, but it offers fewer tax-saving options. On the other hand, the old system provides more exemptions, but the tax slabs are higher. It is hoped that Budget 2026 will provide a clear picture of both systems so that people can decide without any confusion.

The middle class has high hopes for the 87A rebate

Currently, under the new tax system, income up to ₹12 lakh is tax-free. The middle class wants this relief to be extended further, making income up to ₹15 lakh tax-free. With inflation and daily expenses rising rapidly, this relief could be a significant help to millions of families.

Demand for an increase in the Standard Deduction

The standard deduction has been increased to ₹75,000, but this benefit is not yet uniform across all tax systems. Salaried individuals want this benefit to be consistent in both the new and old tax systems to simplify decision-making. There is a persistent demand from the salaried class to increase the standard deduction from ₹75,000 to ₹1 lakh.

Need to simplify the Capital Gains Tax

Investors are troubled by the frequent changes in tax rules on shares, mutual funds, and property. It is hoped that Budget 2026 will simplify capital gains tax. The rules related to holding period, tax rates, and indexation should be straightforward and clear so that people can invest without fear.

Expectations of relief regarding Home Loans and Health Insurance

The new tax system does not offer deductions on home loans and health insurance. According to reports, the government may consider this. If deductions of up to ₹2 lakh on home loan interest and up to ₹50,000 on health insurance are provided, the new tax system could become more attractive to a larger number of people.

Demand to increase the 80C limit

The limit under Section 80C has been stuck at ₹1.5 lakh since 2014, while both expenses and savings have increased. Salaried individuals want this limit to be increased in Budget 2026 so that it becomes relevant again, allowing them to properly benefit from savings instruments like PPF, EPF, and insurance.

Demand for a separate tax system for senior citizens

Senior citizens and pensioners say the new tax system ignores their needs. They face higher medical expenses and daily living costs. Therefore, they are hoping for a separate tax slab or higher exemptions in Budget 2026.

Relief from delays in tax refunds

Many people have to wait for months for their tax refunds. The status is unclear, and the money remains stuck. It is hoped that Budget 2026 will bring faster refunds and a more transparent and reliable system.

Simplified tax slabs like GST

There is now a demand to simplify the income tax slabs, similar to the GST system. Fewer slabs and clearer rates would make it easier to understand and file taxes. This system could also be more efficient for the government.

Demand to increase the home loan interest deduction to ₹5 lakh

Ahead of Budget 2026, the real estate sector has reiterated its demands to the government. According to the real estate sector, the interest deduction on home loans is currently limited to ₹2 lakh, which should be increased to ₹5 lakh. This would provide relief to homebuyers and boost demand for housing.

Demand for a Joint Tax System for Married Couples

There is also talk of introducing a joint tax system for married couples in Budget2026. The demand is that husbands and wives should have the option to file their taxes together. Currently, both have to pay taxes separately, which puts a greater tax burden on families where only one spouse earns an income. If a joint tax system is implemented, the family will be considered a single unit for tax purposes, and many middle-class families could benefit directly.

What are people's expectations from Budget 2026?

The general public and taxpayers have high expectations for the budget. They want the tax system to be simpler, less complicated, and to provide relief to honest taxpayers. It remains to be seen how much relief the government will provide to the middle class and salaried taxpayers. Even a small reduction in income tax can have a direct impact on the pockets of millions of people.

Read More: Union Budget 2026 Date, Time, Live Streaming: All You Need to Know