With Finance Minister Nirmala Sitharaman scheduled to present the Union Budget 2026 on February 1, taxpayers across India are keenly watching for potential changes to the income tax structure. The question on everyone's mind: Will there be further modifications to the New Tax Regime after last year's significant reforms?
In Budget 2025, Sitharaman made a landmark announcement by effectively making income up to ₹12 lakh per annum tax-free under the New Tax Regime. This move was aimed at simplifying taxation and putting more money in taxpayers' pockets. However, experts now suggest that another major overhaul may not be on the cards.
Richa Sawhney, Partner at Grant Thornton Bharat, believes it may not be feasible for the government to introduce sweeping changes so soon after last year's consequential reforms. The focus, instead, appears to be shifting toward making the regime more attractive and sustainable.
Industry experts are calling for specific enhancements that could make the New Tax Regime the clear choice for taxpayers. Gaurav Jain from Forvis Mazars emphasizes the need for certainty, predictability, and disciplined administration. He advocates for limiting prosecution to cases involving willful fraud while decriminalizing technical defaults, which would strengthen taxpayer confidence.
Sawhney suggests incorporating annual adjustments to tax slabs based on inflation and cost-of-living parameters. Such automatic tweaks could benefit a large section of taxpayers and drive wider adoption of the new regime.
One of the most significant demands from tax experts involves reintroducing home loan benefits. Archit Gupta, CEO of ClearTax, has made a strong case for bringing back Section 24(b) deductions under the New Tax Regime. This provision allows taxpayers to claim up to ₹2 lakh on home loan interest payments.
"If the New Regime is to truly become a default choice for mainstream taxpayers, it should accommodate the real aspirations of Indians, and that means bringing Section 24(b) back," Gupta argues. With housing prices rising and affordable supply constrained, such tax support could make homeownership more accessible while making the New Tax Regime financially compelling.
Yashraj Bhardwaj of Petonic AI adds that rationalizing tax slabs, increasing basic exemption limits, and providing limited, well-designed deductions would improve disposable incomes while maintaining ease of compliance.
As the budget date approaches, the consensus among experts is clear: while radical changes may not be expected, targeted improvements focusing on inflation indexation, home loan benefits, and administrative efficiency could significantly enhance the New Tax Regime's appeal.