Union Budget 2026: Will salaried employees get any income tax relief?
- 30th January 2026
- 10:15 AM
- 4 min read
Summary
As the Union Budget 2026 approaches, salaried taxpayers are bracing for stability rather than sweeping tax changes. After last year’s overhaul under the new tax regime, the focus is now on incremental relief- particularly a possible review of the standard deduction, simpler TDS processes, and clearer compliance as the new Income Tax framework takes effect from April 2026.Mumbai | January 30
For millions of salaried Indians, income tax is the most immediate and personal outcome of every Union Budget. As Finance Minister Nirmala Sitharaman prepares to present Budget 2026 on February 1, expectations are restrained but specific.
Most tax professionals believe this year’s Budget will prioritise continuity, with limited room for major slab or rate changes. Instead, any relief is expected to come through small, targeted adjustments that improve take-home pay and reduce friction in tax compliance.
Last year’s tax changes set the base for Budget 2026
Budget 2025 significantly reshaped personal taxation by strengthening the new tax regime. Under the revised structure, income up to ₹12 lakh became tax-free, rising to ₹12.75 lakh for salaried individuals after accounting for the standard deduction. This shift widened the base of beneficiaries and reinforced the government’s preference for a simplified, deduction-light system. With these changes still settling in, Budget 2026 is widely expected to focus on refinement rather than fresh structural reforms.
Standard deduction remains in focus
Among salaried taxpayers, the strongest expectation is around the standard deduction, currently set at ₹75,000 under the new tax regime. With urban living costs- rent, transport, healthcare, and education—continuing to rise, many employees believe the deduction no longer reflects actual expenses.
A limited upward revision in the standard deduction from ₹75,000 to ₹1 lakh is being widely discussed as a possible measure to improve disposable income and provide immediate relief by lowering taxable income, without altering tax slabs or rates.
Such a move would be administratively simple and fiscally manageable, making it one of the most closely watched Budget proposals.
TDS simplification and cash-flow concerns
Another area under scrutiny is Tax Deducted at Source (TDS). Complex thresholds and overlapping provisions often lead to excess deductions during the year, forcing salaried taxpayers to wait for refunds after filing returns.
Market participants expect Budget 2026 to examine ways to:
- Simplify TDS provisions
- Reduce timing mismatches
- Improve cash flow for employees
Even limited rationalisation could ease compliance and reduce dependence on refund cycles.
Transition to the new Income Tax framework
From April 1, 2026, India will move to a single tax-year system, officially replacing the existing “previous year” and “assessment year” framework. This means income will be earned and taxed in the same year.
The change is meant to make tax filing easier in the long run. However, salaried taxpayers are expecting Budget 2026 to act as a bridge by making the new tax regime simpler, before the old regime is eventually phased out.
Salaried taxpayers are seeking clarity on:
- Revised return formats
- Disclosure norms
- Filing timelines during the transition year
Clear rules and communication will be crucial to avoid confusion and filing errors in the first year of the new system.
What Budget 2026 is unlikely to change
Most analysts do not expect:
- Revisions to income tax slabs
- Changes in tax rates under either regime
- A rollback of the new tax structure
At best, relief is expected to be limited, possibly through a review of the standard deduction. The old tax regime is likely to continue alongside the new system for taxpayers who depend on deductions.
Current income tax slabs (FY 2025–26 | AY 2026–27)
New Tax Regime (FY 2025–26)
| Income Tax Slab (₹ lakh) | Tax Rate |
| Up to 4 lakh | Nil |
| 4 lakh to 8 lakh | 5% |
| 8 lakh to 12 lakh | 10% |
| 12 lakh to 16 lakh | 15% |
| 16 lakh to 20 lakh | 20% |
| 20 lakh to 24 lakh | 25% |
| Above 24 lakh | 30% |
Old Tax Regime
| Income Tax Slab (₹ lakh) | Tax Rate |
| Up to 2.5 lakh | Nil |
| 2.5 lakh to 5 lakh | 5% |
| 5 lakh to 10 lakh | 20% |
| Above 10 lakh | 30% |
The choice between the two regimes continues to depend on an individual’s income structure and eligible deductions.
Bottom line
Budget 2026 is unlikely to deliver headline tax cuts for salaried employees. However, incremental changes—particularly around the standard deduction, TDS processes, and compliance clarity—could still ease the tax burden and improve predictability.
For salaried taxpayers, the emphasis this year is less on big announcements and more on stability, simplicity and better implementation of reforms already in place.
For more Budget related updates follow PL Capital.
