Budget 2026 Income Tax Expectation: With the Union Budget 2026 around the corner, taxpayers and pensioners are again hoping for a possible increase in the standard
deduction limit. Standard deduction is one of the most sensible ways of providing tax relief to taxpayers. It allows taxpayers to deduct a certain amount from their total income, thereby reducing their tax liability for the year. Unlike other deductions, the standard deduction is simple, automatic, and does not require any investment proof, making it the most attractive option for salaried individuals and pensioners.
With Finance Minister Nirmala Sitharaman set to present the Union Budget on February 1, taxpayers are eagerly waiting to see if this long-standing tax benefit will be increased, especially under the new income tax regime, which the government has been actively promoting over the last few years.
Budget 2026 Income Tax Expectation: How much standard deduction is allowed?
Currently, the standard deduction is different depending on the tax treatment preferred by the taxpayer. Under the old income tax treatment, the standard deduction has remained constant at Rs 50,000 for many years. On the other hand, in a major step to make the new tax treatment more favourable, the government has increased the standard deduction to Rs 75,000 for salaried class taxpayers and pensioners in 2024.
Budget 2026 Income Tax Expectation: Will standard deduction be increased?
As the Centre remains committed to encouraging more people to switch over to the new income tax system, it is likely that any changes, including an increase in the standard deduction, will be announced in the new system.
As the government pushes for the adoption of the new income tax regime, any major changes, including those in standard deduction limits, are expected only in that regime.
If that happens, it would bring relief to the middle class and further cement the transition towards a simpler tax system with fewer exemptions.
For now, taxpayers await Budget Day with cautious optimism, hoping the government will ease their burden by enhancing this straightforward and widely-used deduction.
Last year, Finance Minister Nirmala Sitharaman announced a major tax relief by making income up to Rs 12 lakh tax-free under the new tax regime. For salaried taxpayers, this threshold effectively rises to Rs 12.75 lakh after factoring in the Rs 75,000 standard deduction.
Budget 2026 Income Tax Expectation: Why standard deduction should be hiked?
For those wondering why the standard deduction should be increased, so to put it simply. The new income tax regime does not offer the benefits of most deductions and exemptions that are available under the old income tax regime. Hiking this limit will push more people to opt for the hassle-free new income tax regime. Some experts also recommend indexing standard deduction limits to inflation to keep them aligned with the rising cost of living.
