Income Tax 2026 Expectations Highlights: What Budget 2026 Could Mean for the Salaried Middle Class?

With the Union Budget 2026 set to be announced on 1 February 2026, the conversation around income tax is heating up. After last year’s major reforms, taxpayers are curious about whether the salaried middle class will see further relief or adjustments in their tax outgo.

Income tax has always been a key focus in every budget, and this year is no different. While Budget 2025 brought sweeping changes, Budget 2026 is expected to refine existing provisions rather than overhaul them completely.

Income Tax in the Spotlight

Income tax continues to dominate discussions among salaried employees. With last year’s changes still fresh in memory, expectations are more targeted:

• Adjustments to standard deduction
• TDS simplification to ease monthly cash flow
• Clear guidance on the new income tax framework

Most experts anticipate no major revision to the slab rates, but even small updates can make a significant difference to taxpayers’ take-home income.

Budget 2026: Key Focus Areas for Salaried Employees

Salaried taxpayers are paying close attention to areas that directly affect their monthly income.

Standard Deduction

• Currently, the standard deduction under the new tax regime stands at ₹75,000
• Previously, it was increased from ₹50,000
• Any further adjustment could reduce taxable income and increase take-home salary

TDS Rationalisation

• Streamlined Tax Deducted at Source (TDS) rules can simplify compliance
• Even minor tweaks can improve cash flow for salaried individuals

Overall, Budget 2026 may focus on fine-tuning these provisions rather than introducing sweeping reforms.

Income Tax Slabs for FY 2025–26 (AY 2026–27)

Understanding slab rates is key to calculating your tax liability. The current slabs are as follows:

Old Tax Regime

• Income up to ₹2,50,000 – No tax
• ₹2,50,001 to ₹5,00,000 – 5% tax
• ₹5,00,001 to ₹10,00,000 – 20% tax
• Income above ₹10,00,000 – 30% tax

New Tax Regime

• Income up to ₹3,00,000 – No tax
• ₹3,00,001 to ₹6,00,000 – 5% tax
• ₹6,00,001 to ₹9,00,000 – 10% tax
• ₹9,00,001 to ₹12,00,000 – 15% tax
• ₹12,00,001 to ₹15,00,000 – 20% tax
• Income above ₹15,00,000 – 30% tax

The key difference is that the old regime allows more deductions, while the new regime spreads income across more slabs, benefiting many taxpayers with lower tax liability.

Old vs New Tax Regime: What You Should Know?

Choosing between the two regimes depends on your income structure:

• Old Tax Regime: Fewer slabs but allows multiple deductions
• New Tax Regime: More slabs, fewer deductions (e.g., NPS investments)

While the new regime often reduces tax for many, the old regime is useful for those with several eligible deductions.

Income Tax Changes Introduced in Budget 2025

Budget 2025 reshaped the income tax landscape:

• Tax on earnings up to ₹12 lakh was reduced
• Salaried employees saw non-taxable income rise to ₹12.75 lakh under the new regime
• Introduction of the New Income Tax Act, 2025, effective from 1 April

These reforms have set the stage for expectations from Budget 2026, where refinements are anticipated.

How to Calculate Your Income Tax for FY 2025–26?

Calculating tax is simple:

1. Total your annual income, including salary and other sources
2. Decide between the old or new tax regime
3. Identify your tax slab and apply the relevant rates
4. Optionally, use an online income tax calculator for quick computation

This helps taxpayers estimate their annual tax liability accurately.

Summary: What to Expect from Income Tax 2026?

Income Tax 2026 is expected to focus on continuity and fine-tuning:

• Key attention on standard deduction and TDS rules
• No major change in tax slabs is anticipated
• The New Income Tax Act, 2025, will continue to guide tax calculations

For salaried taxpayers, even small adjustments can have a meaningful impact on take-home pay. As Budget Day approaches, income tax remains a key area to watch.

Source: Livemint