Financial Budget FY 2026-27: What to Expect?

Finance Minister Nirmala Sitharaman will present it on February 1 at 11:00 am, a move that has prompted BSE and NSE to schedule special trading sessions to capture real-time market reactions.With Viksit Bharat 2047 vision leading the government's policy framework, the financial budget 2026 is likely to be a balancing act between upholding fiscal discipline and providing relief for the consumption-driven middle class. Here is an in-depth breakdown of important expectations of common people related to their finances, including Tax Slabs 2026 and more.Key expectationsSome of the key expectations from Budget 2026-2027 include:Standard deduction hikeFor the salaried workforce, the biggest expectation in the Income Tax Budget 2026 is centred around the standard deduction. The standard deduction has been raised to ₹75000 under the last budget. Tax experts and industry bodies are expecting the Finance Minister to increase this threshold from ₹75,000 to ₹1,00,000 lakh. A hike in this would immediately add to the disposable income of the middle class, and it would raise the tax-free income limit (currently about ₹12.75 lakhs plus rebates) to ₹13 lakhs. Tax slabsThe government has been aggressively pushing the new income tax slabs as the default and the most attractive regime. While the zero-tax rebate limit has been increased to ₹12 lakh in the last budget, the emphasis this year will be on the higher income levels and increasing the rebate under Section 87A to ₹15 lakh. Section 80C boostDeductions under Section 80C (contributions to provident fund, insurance, ELSS) are long overdue for review, as they were last capped at ₹1.5 lakh for years. An improved 80C cap could aid salaried employees and professionals in claiming meaningful deductions to inflationary costs in education, insurance and retirement planning. This would impact individuals based on tax slabs for salaried employees and otherwise. Capital gains & investmentsAlong with the deduction, there is a strong demand to enhance the exemption limit of long-term capital gains (LTCG) tax from the current ₹1.25 lakh to ₹2 lakh, which will encourage investors to invest in the equity markets for the long term. Other investment incentives, such as retirement-linked instruments or simplified treatment for hybrid funds, may also be proposed in conjunction with this.High-Income & Surcharge tweaksHigh-net-worth individuals (HNIs) are seeking relief from the high surcharge rates that make the effective tax rate much higher than the base rate. There is an expectation for bringing down the maximum surcharge to 15% for all taxpayers to spur investment activity, which in turn garners more taxes.Home Loan reliefWith the real estate industry looking for support, there is speculation about the Section 24(b) deduction on home loan interest. Proposals are to raise the deduction limit from the present amount of ₹2 lakh to ₹5 lakh. Some reports indicate that the government may want to consider allowing a part of this deduction under the new tax regime to support the Housing for All initiative, and that would be a massive game-changer for prospective homebuyers.TDS simplificationEase of doing business is a priority in today’s digital world. The budget is expected to bring in simplification of tax deducted at source (TDS) norms, which may lead to a reduction in the number of sections of TDS and rationalisation of rates to reduce the burden of litigation and compliance for small businesses and professionals. A simplified structure of TDS would reduce the administrative burden on the taxpayers to a great extent.Tech for Tax filingAs part of broader reform under the new income tax act, the government is taking a step ahead towards technology adoption to improve return filing, refunds and taxpayer services. Steps towards digitisation and simplification are major priorities in this budget cycle with AI integration. Dispute resolutionIn order to unclog the legal system, the budget may introduce a new dispute resolution mechanism with the use of AI or the improvement of existing mechanisms. Reducing the pendency of tax litigation is a key priority in this budget to enhance ease of doing business and provide certainty to taxpayers regarding their liabilities.Also read Union Budget trends from the last 15 years to know what to expect from the market on the budget day, and which sectors will benefit from the budget 2026-27.To wrap upAs India gears up for the Union Budget 2026, taxpayers are hopeful of some incremental measures in the personal tax structure. The official confirmation regarding all these exceptions will be made when Finance Minister Nirmala Sitharaman unveils the financial budget 2026 on 1st February 2026.

Financial Budget FY 2026-27: What to Expect?

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