5 ways Finance Minister Nirmala Sitharaman can further sweeten the new tax regime, as per experts

As Budget 2026 approaches, taxpayers are hoping for meaningful tweaks to the new tax regime that can ease the burden on salaried individuals and professionals. While the simplified regime offers lower tax slabs, the absence of certain exemptions and deductions continues to leave many with higher taxable incomes.

Experts have suggested several ways the Finance Minister could further sweeten the new tax regime.

1) Higher surcharge threshold

The body highlighted that surcharge is based on total income, not tax liability. “Even if the total income exceeds ₹50 lakh by, say, ₹2 lakh, surcharge at 10% would be attracted on the entire tax liability,” it added. ICAI suggests that increasing the threshold would make the levy fairer for high-income taxpayers under the new regime.

2) Increase standard deduction

Abhishek Soni, CEO & Co-founder of Tax2win, added, “Given rising living and work-related expenses, the standard deduction should be increased to ₹1,00,000,” noting that defence personnel could receive even higher deductions.

3) Section 80D deduction

One of the key expectations from Budget 2026 is the inclusion of health insurance deductions under the new tax regime, which currently does not allow most exemptions. Section 80D, which lets taxpayers claim deductions on premiums paid for self, spouse, children, and parents, has become increasingly important as medical costs rise.

This is available only under the old tax regime. Currently, taxpayers can claim up to ₹25,000 for premiums paid for self, spouse and children, with an additional ₹25,000 for parents, rising to ₹50,000 if the parents are senior citizens.

4) Home loan deduction

Experts suggest allowing limited home loan benefits for first-time buyers. This, they say, would support young homeowners and bring a better balance between the old and new tax regimes.

5) HRA benefits

Under the new regime, House Rent Allowance (HRA) exemptions are unavailable. Rent paid for accommodation is fully taxable unless claimed under standard deductions or other allowances.

While the new regime offers lower income tax slabs, the absence of HRA exemptions makes it less beneficial for salaried employees living in rented homes, especially in metro cities.

Experts recommend introducing some HRA relief or an alternative deduction to make the regime fairer for renters.

While the new tax regime makes filing easier and lowers tax rates for many, these changes could make it even more practical. If included in Budget 2026, they would help ease the financial burden on millions of taxpayers.