Income Tax Changes Shape Budget 2026 Expectations

As the government gets ready to present the Union Budget 2026, the future of India’s personal income tax system is becoming clearer. The changes announced in Budget 2025, especially the big increase in the basic exemption limit under the New Tax Regime, are shaping expectations that the simplified tax system will be pushed even more in the coming year.

In the Union Budget 2025, Finance Minister Nirmala Sitharaman raised the basic exemption limit under the New Tax Regime from Rs 3 lakh to Rs 4 lakh. This gave significant relief to salaried taxpayers. Along with an increased standard deduction, the changes meant that salaried people earning up to Rs 12.75 lakh no longer had to pay any income tax under the New Tax Regime.

As Budget 2026 draws closer, many taxpayers are now thinking seriously about whether they should shift to the New Tax Regime or stay with the Old Tax Regime. While the new system offers lower tax rates and a simpler structure, the old system still allows more exemptions and deductions such as those for savings, insurance and housing loans.

With the government showing a clear preference for the simplified tax structure, taxpayers are closely watching the upcoming budget for further changes that could make the New Tax Regime more attractive.