Let’s be honest: filing your taxes is about as fun as a root canal. But what if the upcoming Budget 2026 income tax announcements could actually put money back in your pocket—or even make your entire salary tax-free? With the government preparing to roll out a brand-new Income-tax Act in April 2026, the stakes have never been higher for individual taxpayers.
The finance minister has a golden opportunity to not just tweak the system, but to fundamentally simplify it and offer real, tangible relief to the middle class. Forget the jargon; this is about your hard-earned cash. So, what are the top things you should be watching for? Let’s break it down.
Table of Contents
- The New Income-tax Act 2026: A Fresh Start
- Budget 2026 Income Tax Demand #1: Supercharge the Standard Deduction
- Demand #2: Expand the Section 87A Rebate to Cover More Income
- Demand #3: Align Capital Gains with Income Tax Rules
- Demand #4: Push the 30% Tax Slab Threshold Higher
- Conclusion: What’s Next for Your Wallet?
- Sources
The New Income-tax Act 2026: A Fresh Start
Before we dive into the wishlist, it’s crucial to understand the context. In a landmark move, the Indian government is replacing the archaic Income-tax Act of 1961 with a completely new law, effective from April 1, 2026 . This isn’t just a cosmetic update; it’s a full-scale overhaul aimed at simplifying procedures, modernizing forms, and making the entire tax experience less of a headache .
This new framework creates the perfect backdrop for the Union Budget to introduce taxpayer-friendly measures. It’s a chance to build a simpler, fairer system from the ground up . Think of it as a clean slate where the government can address long-standing pain points without being bogged down by decades of legacy rules.
Budget 2026 Income Tax Demand #1: Supercharge the Standard Deduction
If there’s one demand that unites salaried employees across the country, it’s a hike in the standard deduction. Currently, under the new tax regime, you can deduct ₹75,000 from your salary income before calculating your tax . While this was a welcome step up from the previous ₹50,000, experts and industry bodies are now pushing for it to be doubled to a cool ₹1 lakh .
Why does this matter? A higher standard deduction directly reduces your taxable income. For someone earning ₹15 lakh, an increase to ₹1 lakh would mean their taxable income drops to ₹14 lakh, resulting in immediate tax savings. It’s a simple, direct way to boost take-home pay without complicating the tax code. This is a top priority on the income tax expectations Budget 2026 list for a very good reason .
Demand #2: Expand the Section 87A Rebate to Cover More Income
Section 87A is the magic wand of the tax world—it can make your entire tax liability disappear. Right now, under the new regime, if your total taxable income is up to ₹12 lakh, you pay zero income tax thanks to this rebate . But there’s a strong push to raise this limit to ₹15 lakh .
Imagine that: a salary of ₹15 lakh a year, and you owe nothing to the taxman. This would be a massive win for the upper-middle class, who often feel squeezed between rising costs and stagnant tax benefits. However, there’s a major caveat. The current Section 87A rebate doesn’t apply to capital gains from equity investments . This creates an unfair situation where two people with the same total income could have vastly different tax bills based on the source of that income. A truly fair system would fix this loophole.
Demand #3: Align Capital Gains with Income Tax Rules
Building on the previous point, the disconnect between how salary income and investment income are taxed is a growing source of frustration. Why should long-term capital gains (LTCG) from stocks be taxed separately at 12.5%, while your salary is slotted into progressive income tax slabs?
Tax experts are urging the government to integrate capital gains into the main income tax structure . This would mean your stock profits would be added to your salary, and you’d pay tax on the total amount according to the standard slabs. This move would not only simplify your tax return but also ensure everyone is playing by the same rules. It’s a key ask for a more coherent and just tax system under the new Income-tax Act 2026.
Demand #4: Push the 30% Tax Slab Threshold Higher
The highest tax slab kicks in at a relatively low threshold. Currently, income above ₹15 lakh is taxed at 30%. With inflation and expected salary hikes from the 8th Pay Commission, many more taxpayers are getting pushed into this top bracket—a phenomenon known as “bracket creep” .
To prevent this, there’s a clear expectation that the government will raise the starting point for the 30% slab, possibly to ₹25 lakh or even ₹35 lakh . This would provide much-needed relief to senior professionals and executives who are seeing their disposable income shrink despite nominal pay increases. It’s a critical adjustment to keep the tax system in line with economic realities.
Conclusion: What’s Next for Your Wallet?
The Budget 2026 income tax announcements hold immense potential to deliver real financial relief to millions of Indians. From a supercharged standard deduction to a more inclusive Section 87A rebate and a fairer treatment of investment income, the wishlist is both practical and impactful. With the new Income-tax Act 2026 on the horizon, the government has a unique chance to build a tax system that’s not just simpler, but also genuinely supportive of its citizens. Keep a close eye on February 1st—your wallet might just thank you.
For more on navigating the current tax landscape, check out our guide on [INTERNAL_LINK:maximizing_tax_savings_under_new_regime]. You can also refer to the official resources on the Income Tax Department website for the latest updates.
Sources
- “New Income Tax rules from April 2026: How it affects you”
- “Income Tax Rule 2026: How Will New Changes Affect”
- “Income tax change expectations from Budget 2026: Full list”
- “Income Tax Union Budget 2026 Expectations Live”
- “Union Budget 2026-27 Expectations: What India Awaits”
- “India Union Budget 2026-27”
- “Income tax rebate under Section 87A”
- “Budget 2026: Rs 15 Lakh Tax Rebate For Middle Class”
- “Budget 2026 Income Tax Expectations Live: Will FM extend”
- “Zero tax up to Rs 12 lakh, but not on capital gains? Why”
- “Budget 2026 Wishlist: Income Tax Slabs, Deductions &”
- “💼 Union Budget 2026 may skip big tax reforms but offer”