As the financial year progresses, anticipation for Budget 2026 is steadily building, with millions of salaried taxpayers eagerly looking towards Finance Minister Nirmala Sitharaman. Their primary hope, a consistent refrain echoing through pre-budget consultations and public discourse, revolves around significant relief in income tax, particularly a long-overdue increase in the standard deduction limit under the relatively newer income tax regime. This expectation is rooted in the continuous push for greater disposable income amidst persistent inflationary pressures.
The introduction of the new income tax regime was primarily aimed at simplifying tax filing and offering lower tax rates without the complexity of numerous deductions and exemptions. While it has gained some traction, a critical concern for salaried individuals choosing this regime has been the absence, or rather, the inadequacy, of the standard deduction compared to the old regime. Initially, the new regime offered no standard deduction, a significant point of contention for many. While a standard deduction of Rs 50,000 was eventually extended to the new regime from Budget 2023, many feel this amount is now woefully insufficient given the prevailing economic realities and the rising cost of living in urban and semi-urban centers.
Salaried individuals face unique financial pressures. Unlike businesses or professionals who can claim a wider array of business expenses, their income streams are often fixed, and they have fewer avenues for tax-saving investments under the new regime. The standard deduction acts as a blanket allowance for various employment-related expenses, commuting costs, professional development, and general cost of living adjustments. With inflation impacting everyday essentials, transport, housing rents, and even educational expenses, the current Rs 50,000 deduction provides minimal solace. Taxpayers argue that a substantially higher standard deduction would genuinely boost their take-home pay, providing much-needed financial breathing room to middle-class households struggling to balance their budgets.
Experts and taxpayer associations alike are vociferously advocating for a significant hike, suggesting figures ranging from Rs 75,000 to even Rs 1 lakh. Such a move would not only align the new regime more closely with the benefits perceived under the old regime but also make it a far more attractive and equitable option for a larger segment of the salaried population. It would simplify financial planning for many, encouraging more individuals to opt for the streamlined new regime without feeling shortchanged, thereby promoting compliance and reducing the complexity often associated with tax declarations.
Beyond the standard deduction, there are subtle whispers of other potential tweaks. While the central focus remains on enhancing the standard deduction, some also hope for minor adjustments to income tax slabs within the new regime or the reintroduction of certain specific deductions that could benefit a broad base of salaried employees, perhaps related to health insurance premiums or education expenses for dependents. However, these remain secondary to the overwhelming demand for a more generous standard deduction.
Ultimately, Budget 2026 presents a crucial opportunity for the government to demonstrate its unwavering commitment to the financial well-being of the salaried class, who form the backbone of the economy. A judicious and meaningful increase in the standard deduction under the new income tax regime would not merely be a tax relief measure; it would be a powerful statement of support, potentially stimulating consumption, fostering economic growth, and offering tangible, immediate financial support to millions of hardworking individuals across the nation. All eyes are now firmly on FM Nirmala Sitharaman to deliver on these vital expectations and provide the much-anticipated relief.