Income Tax Budget 2026: Following the reforms announced in Budget 2025, such as higher tax rebates and revised slabs, the New Tax Regime has become significantly more attractive for most taxpayers. Consequently,
its adoption is expected to increase further when income tax returns for the current financial year are filed. Now, attention has shifted to what Budget 2026 may hold — particularly for income tax.
Will Budget 2026 bring further income tax changes?
While the government has continued to simplify the regime by modifying slabs and reducing complexities, the question now is whether any further income tax changes will be announced in Budget 2026.
According to Richa Sawhney, Partner, Tax, at Grant Thornton Bharat, further changes to the New Tax Regime may not be feasible, given the significant overhaul carried out last year.
Tax experts surveyed by News18 broadly agree that no major income tax announcements are likely in this year’s Budget.
Experts expect stability, not fresh slab revisions
Preeti Sharma, Partner – Tax and Regulatory Services at BDO India, noted that for taxpayers who are unable to claim substantial deductions, the New Tax Regime typically results in a lower tax burden.
“Since the government has already made major improvements to the new income tax regime in Budget 2025, big changes to tax slabs are unlikely this year,” she said.
Data shows rising acceptance of the New Tax Regime
Official data also reflects rising acceptance of the new regime. Of the 7.28 crore income tax returns filed for AY 2024–25, nearly 72 per cent were filed under the New Tax Regime, while only 28 per cent opted for the old regime.
“This shows that most taxpayers now find the new tax regime simpler and more tax-efficient,” Sharma added.
No immediate reform in view?
Surbhi Marwah, Tax Partner at EY India, echoed similar sentiments. She pointed out that the new regime has already been liberalised through lower slabs and higher rebates, and that Parliament has clarified no further proposals are currently under consideration.
“The immediate focus is likely to be on stability and a smooth transition rather than introducing additional reforms. Any refinements, if considered, will follow a phased approach aligned with tax certainty and compliance simplification,” she said.
Budget 2026: How can the New Tax Regime be more attractive?
Despite multiple slab revisions, a section of taxpayers continues to prefer the old regime because of the wide range of deductions it offers.
Preeti Sharma said the government could consider minor tweaks to the new regime to enhance its appeal, particularly for middle-class taxpayers.
What changes do tax experts suggest?
Akhil Chandna, Partner and Global People Solutions Leader at Grant Thornton Bharat, suggested increasing the standard deduction limit and permitting select deductions such as health insurance premiums and home loan interest under the new regime to encourage wider adoption.
Radhika Viswanathan, Executive Director at Deloitte India, observed that taxpayers earning between Rs 12 lakh and Rs 30 lakh — especially those with home loans and insurance policies — often still find the old regime more beneficial.
To address this gap, she proposed targeted measures such as:
- Allowing a capped deduction for interest on self-occupied house property, for instance up to Rs 2 lakh
- Permitting employee contributions to NPS as a deduction, similar to employer contributions
- Introducing limited deductions for health insurance premiums
“While the government’s focus remains on simplification and large-scale deductions are unlikely, selective relief in these areas could make the new regime far more compelling for a wider segment of taxpayers,” she said.
Reintroduce home loan interest deductions, say experts
ClearTax founder and CEO Archit Gupta stressed the importance of incorporating Section 24(b) of the Income Tax Act, 1961, into the New Tax Regime. This provision allows taxpayers to claim a deduction of up to Rs 2 lakh on interest paid on a home loan for a self-occupied property.
“If the New Regime is to be more than ‘simpler’ and truly become a default choice for mainstream taxpayers, it should accommodate the real aspirations of Indians — and on home ownership, that means bringing Section 24(b) back into the regime,” he said.
Gupta added that introducing interest deductions under the new regime would reduce the cost of housing finance.
“In a context where prices are rising, and affordable supply is constrained, giving home buyers predictable and meaningful tax support will make the New Regime not just easier to file, but financially compelling to choose,” he said.
