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As Union Budget 2026 approaches, expectations among taxpayers are running high. Finance Minister Nirmala Sitharaman is set to present the budget on February 1, and individuals across income groups are keenly watching for announcements related to income tax. In the previous budget, the government introduced several significant relief measures, especially under the new income tax regime. With the new Income Tax Act, 2025 scheduled to come into force from April 1, many are wondering whether Budget 2026 will bring similarly big benefits.

To understand what may lie ahead, it is useful to revisit the five major tax reliefs announced in the last Union Budget and assess the current outlook.

1. Income Up to ₹12 Lakh Made Tax-Free Under New Regime

One of the biggest announcements in the Union Budget 2025 was the decision to make annual income up to ₹12 lakh tax-free under the new income tax regime. Due to the inclusion of a standard deduction of ₹75,000, salaried individuals effectively became tax-free on income up to ₹12.75 lakh.

This move significantly reduced the tax burden on middle-class taxpayers and made the new regime more attractive compared to the old system. It is important to note that this benefit applied exclusively to those opting for the new tax regime.

2. Basic Exemption Limit Increased to ₹4 Lakh

Another major relief came in the form of an increase in the basic exemption limit. Under the new tax regime, the exemption threshold was raised from ₹3 lakh to ₹4 lakh. This meant that individuals earning up to ₹4 lakh annually were not required to pay any income tax.

This change directly benefited lower-income taxpayers and strengthened the government’s effort to simplify and popularize the new tax structure.

3. Revised Income Tax Slabs Under the New Regime

The government also introduced a revised and more gradual tax slab structure in the previous budget. Under the new regime, income tax rates were structured as follows:

• 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%

This revised slab system reduced the sharp jump in tax rates and provided smoother progression, benefiting taxpayers across multiple income brackets.

4. Extended Timeline for Filing Updated Returns

In a taxpayer-friendly move, the government extended the time limit for filing updated income tax returns. Previously, taxpayers could file an updated return within two years. This window was increased to four years in the last budget.

The extended timeline provided relief to individuals who had missed reporting income or made errors in earlier filings, allowing them more time to comply without facing severe penalties.

5. Higher TDS Threshold on Rental Payments

The previous budget also addressed concerns related to tax deducted at source (TDS) on rent. The annual rental threshold for TDS was increased from ₹2.4 lakh to ₹6 lakh. This change reduced compliance pressure for both tenants and landlords, especially those dealing with modest rental incomes.

What Can Taxpayers Expect in Budget 2026?

Tax experts believe that Budget 2026 may not offer relief on the same scale as last year. Instead of sweeping tax cuts or slab changes, the focus is expected to be on the implementation and fine-tuning of the new Income Tax Act, 2025, which comes into effect from April 1.

The government has clarified that the new Act is aimed at simplifying tax laws and improving clarity by using easier language. It does not propose fundamental changes to tax rates or structures. Several outdated provisions have been removed to make compliance easier and reduce confusion.

Final Outlook

While major tax giveaways may be unlikely in Budget 2026, taxpayers can still expect policy clarity and smoother implementation of the new tax framework. The relief announced in the previous budget has already provided substantial benefits, particularly to middle-income earners.

As the budget day approaches, taxpayers are advised to stay informed and focus on long-term tax planning rather than expecting dramatic last-minute changes. Budget 2026 may prioritize stability, simplicity, and consistency over large-scale tax reductions, setting the tone for a more streamlined tax system going forward.