Budget 2026 Income Tax Expectations: Top 4 Things Individual Taxpayers Want
As the Finance Minister prepares to present the Union Budget 2026 on 1 February, India is facing a highly uncertain economic landscape. Geopolitical tensions, fluctuating oil prices, volatile capital markets, and a shifting exchange rate have made the environment unpredictable. On top of this, India is gearing up for a major tax overhaul with the new Income-tax Act coming into effect from 1 April 2026.
Despite these challenges, one expectation remains constant among individual taxpayers: they want more money in their hands. With rising living costs and growing financial pressure on households, salaried individuals are hoping the Budget will deliver meaningful relief. However, given the upcoming transition to a new tax regime, significant changes may be limited. Instead, the Budget is likely to focus on practical, micro-level reforms that improve compliance and make the tax system more taxpayer-friendly.
Here are the top tax expectations that individuals are hoping will be addressed in Budget 2026.
1. A Higher Standard Deduction: A Direct Relief for Salaried Individuals
One of the most commonly requested changes is an increase in the standard deduction. Currently, the standard deduction stands at:
With inflation pushing daily expenses higher, salaried taxpayers are hoping for a raise to at least ₹1 lakh. This would provide immediate relief to households and help reduce the impact of rising living costs. A higher standard deduction would also simplify tax planning for many employees, especially those who do not claim multiple deductions.
2. EV Perquisite Valuation Rules: Time For A Modern Update
Electric vehicles (EVs) are quickly becoming the future of mobility, and many employers are encouraging employees to switch to EVs through company car policies. However, the current tax rules for perquisite valuation still rely on the engine’s cubic capacity, a measure that is irrelevant for EVs which do not have traditional engines.
This mismatch has led to unfair tax treatment of EVs. To encourage clean mobility and align with ESG goals, taxpayers expect the government to introduce a separate valuation method for EVs, reflecting their unique technology and promoting wider adoption.
3. Housing Loan Interest Relief Under The New Tax Regime
Home loan interest deductions have long been a major benefit for taxpayers, especially for middle-income families. Under the old tax regime, individuals can claim deductions for interest paid on home loans even for self-occupied properties.
However, the new tax regime does not allow such deductions, which has caused concerns among homeowners. With property prices rising and the government pushing for affordable housing, taxpayers hope the Budget will restore interest deduction for self-occupied properties under the new regime. This change would encourage home ownership and make the new tax regime more attractive for middle-income families.
4. Extended Deadlines For Revised Or Belated Returns
Currently, taxpayers can file a revised or belated return only up to 31 December of the following financial year. This deadline often creates difficulties for individuals with cross-border income or investments, as foreign tax filing timelines may not align with India’s deadline.
For example, a taxpayer who has recently become a resident in India may need to report global income for parts of two calendar years. However, tax filings in their home country may be completed later, creating a mismatch. This can lead to unintentional errors in income reporting. Extending the deadline for revised or belated returns would provide relief and help taxpayers ensure accurate reporting.
Why These Changes Matter
As India transitions to the new Income-tax Act in April 2026, the Union Budget is an opportunity to address long-standing concerns of individual taxpayers. While sweeping reforms may not be expected in a year of major tax reform, targeted improvements can still make a significant difference.
Enhancing deductions, improving tax timelines, and updating outdated rules will not only reduce the burden on taxpayers but also increase confidence in the new tax system. These changes could improve compliance and make the tax experience smoother for millions of Indians.
What To Expect From Budget 2026
Budget 2026 is likely to focus on practical and administrative reforms, such as:
In the end, taxpayers hope the Budget will strike a balance between fiscal prudence and real relief. With inflation and living costs continuing to rise, even small changes can have a meaningful impact on household finances and that’s what many Indians will be watching for this February.
Despite these challenges, one expectation remains constant among individual taxpayers: they want more money in their hands. With rising living costs and growing financial pressure on households, salaried individuals are hoping the Budget will deliver meaningful relief. However, given the upcoming transition to a new tax regime, significant changes may be limited. Instead, the Budget is likely to focus on practical, micro-level reforms that improve compliance and make the tax system more taxpayer-friendly.
Here are the top tax expectations that individuals are hoping will be addressed in Budget 2026.
1. A Higher Standard Deduction: A Direct Relief for Salaried Individuals
One of the most commonly requested changes is an increase in the standard deduction. Currently, the standard deduction stands at:
- ₹50,000 under the old tax regime
- ₹75,000 under the new tax regime
With inflation pushing daily expenses higher, salaried taxpayers are hoping for a raise to at least ₹1 lakh. This would provide immediate relief to households and help reduce the impact of rising living costs. A higher standard deduction would also simplify tax planning for many employees, especially those who do not claim multiple deductions.
2. EV Perquisite Valuation Rules: Time For A Modern Update
Electric vehicles (EVs) are quickly becoming the future of mobility, and many employers are encouraging employees to switch to EVs through company car policies. However, the current tax rules for perquisite valuation still rely on the engine’s cubic capacity, a measure that is irrelevant for EVs which do not have traditional engines.You may also like
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This mismatch has led to unfair tax treatment of EVs. To encourage clean mobility and align with ESG goals, taxpayers expect the government to introduce a separate valuation method for EVs, reflecting their unique technology and promoting wider adoption.
3. Housing Loan Interest Relief Under The New Tax Regime
Home loan interest deductions have long been a major benefit for taxpayers, especially for middle-income families. Under the old tax regime, individuals can claim deductions for interest paid on home loans even for self-occupied properties. However, the new tax regime does not allow such deductions, which has caused concerns among homeowners. With property prices rising and the government pushing for affordable housing, taxpayers hope the Budget will restore interest deduction for self-occupied properties under the new regime. This change would encourage home ownership and make the new tax regime more attractive for middle-income families.
4. Extended Deadlines For Revised Or Belated Returns
Currently, taxpayers can file a revised or belated return only up to 31 December of the following financial year. This deadline often creates difficulties for individuals with cross-border income or investments, as foreign tax filing timelines may not align with India’s deadline.For example, a taxpayer who has recently become a resident in India may need to report global income for parts of two calendar years. However, tax filings in their home country may be completed later, creating a mismatch. This can lead to unintentional errors in income reporting. Extending the deadline for revised or belated returns would provide relief and help taxpayers ensure accurate reporting.
Why These Changes Matter
As India transitions to the new Income-tax Act in April 2026, the Union Budget is an opportunity to address long-standing concerns of individual taxpayers. While sweeping reforms may not be expected in a year of major tax reform, targeted improvements can still make a significant difference. Enhancing deductions, improving tax timelines, and updating outdated rules will not only reduce the burden on taxpayers but also increase confidence in the new tax system. These changes could improve compliance and make the tax experience smoother for millions of Indians.
What To Expect From Budget 2026
Budget 2026 is likely to focus on practical and administrative reforms, such as:
- Faster tax refunds
- Simplified compliance
- Digital tax processes
- Improved taxpayer services
In the end, taxpayers hope the Budget will strike a balance between fiscal prudence and real relief. With inflation and living costs continuing to rise, even small changes can have a meaningful impact on household finances and that’s what many Indians will be watching for this February.
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