Budget 2026: After Big Tax Relief, Middle Class May See Tweaks, Not Overhaul

As India heads into the Union Budget 2026–27, expectations of sweeping personal income tax changes appear muted, with experts pointing out that the middle class has already received substantial relief in recent years.

According to Chirag Chauhan, CA & Founder, C A Chauhan & Co., recent policy changes have significantly eased the tax burden on salaried taxpayers.

“With rebate and standard deduction, income up to Rs 12.75 lakh is effectively tax-free for salaried individuals,” Chauhan said, noting that Budget 2025 had already expanded exemptions and boosted disposable incomes.

With major relief already built into the system, experts believe Budget 2026 is more likely to fine-tune the existing structure rather than announce headline-grabbing slab changes.

Income Tax Slabs, Adjustments on the Table

On the personal tax front, Chauhan expects incremental changes instead of large-scale restructuring. While a complete revamp of slabs appears unlikely, selective adjustments could be considered to account for inflation and rising living costs.

Among the measures being discussed in policy circles are:

• Raising the 30% top tax slab threshold from around Rs 25 lakh to Rs 35 lakh

• Increasing the standard deduction beyond current levels

• Enhancing deduction limits under Sections 80C and 80D in the old tax regime

• Rationalising surcharge structures to reduce sharp marginal tax spikes

These changes, experts say, would offer relief without significantly straining government finances.

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Economic Survey Signals Fiscal Caution

The Economic Survey has reinforced expectations of a cautious approach. It noted that the government had already announced significant tax breaks for households in the February FY26 Budget, while maintaining fiscal discipline.

According to the Survey, the Centre achieved a fiscal deficit of 4.8% of GDP, better than the budgeted 4.9%, and set a target of 4.4% for FY26, in line with its commitment to steadily reduce the deficit from 9.2% in FY21.

This fiscal roadmap suggests that any further tax relief in Budget 2026 is likely to be measured and targeted, rather than expansive.

Simplification and Compliance Expected

Beyond rate changes, simplification is expected to be a key theme. Chauhan pointed to ongoing efforts to streamline tax compliance under the new Income Tax Act, expected to come into effect from April 2026.

A major proposal under consideration is the introduction of a single, simplified Income Tax Return (ITR) form for individuals opting for the new tax regime.

“The focus seems to be on tax certainty, ease of compliance, and boosting consumption rather than drastic slab overhauls,” Chauhan said.

Budget 2026 is expected to prioritise predictability, simplicity, and targeted relief over dramatic tax announcements. For taxpayers, the emphasis may shift from how much tax is cut to how easy and predictable the tax system becomes.

Also read: Budget 2026: Taxation Done, Manufacturing Boost Next? Experts Weigh In