When Finance Minister Nirmala Sitharaman presents the Union Budget on February 1, anticipations will once again be elevated among middle-class taxpayers.
This year's backdrop is different. Unlike previous years, many taxpayers saw the effects of Budget 2025 in their monthly pay stubs. Under the new regime, the Modi government exempted up to Rs. 12.75 lakh of income from taxes.
The main question today is whether Budget 2026 will expand that assistance or merely consolidate the gains already made.
For many years, income tax reduction was mostly theoretical and only showed up in calculations rather than actual cash flows. Budget 2025 brought about one of the most significant changes to the new tax system. Higher deductions combined with slab rearrangement provided the biggest relief, according to Anita Basrur, partner at Sudit K Parekh & Co LLP.
“The increase in the tax-free limit for FY 2025–2026 under the new regime, up to Rs 12 lakh for resident individuals and an additional 75,000 for salaried employees, is the most significant tax relief.”
Additionally, the standard deduction for salaried taxpayers was doubled from Rs. 50,000 to Rs. 75,000, and the basic exemption level was enhanced from Rs 3 lakh to Rs 4 lakh. The highest tax rate now only applies to amounts over Rs. 24 lakh, rather than Rs. 15 lakh, as a result of the slab reorganization.
“In contrast to Budget 2024, Budget 2025 significantly relieved middle-class taxpayers by expanding the tax slabs under the new tax regime and raising the basic exemption limit from Rs. 3,00,000 to Rs. 4,00,000, resulting in tax savings of up to Rs. 1,14,400.”
Furthermore, the Section 87A refund was increased to Rs 60,000, guaranteeing that anyone earning up to Rs 12 lakh paid no income tax.
Amit Baid provides a concise summary of the general sentiment. He claims that while there would not be significant tax reductions for the middle class in Budget 2026, that might not be the true necessity. “A smooth and dependable tax system may provide the greatest relief for the middle class, rather than lower rates.”
Taxpayers appear to be adjusting their expectations as Budget Day draws near. Even while headline-grabbing tax cuts are still unlikely, stability, easier compliance, quicker refunds, and a predictable tax system are now anticipated following the significant savings in Budget 2025.