After 2025’s masterstroke: What more income taxpayers expect from FM Nirmala Sitharaman in Budget 2026

Budget 2025 firmly placed personal finance at the centre of the policy conversation. With sweeping income tax changes, a simplified structure, and the headline-grabbing move of making income up to ₹12 lakh effectively tax-free under the new regime, the Finance Minister delivered what many salaried taxpayers had long hoped for. The new tax regime suddenly looked not just simpler, but genuinely lucrative.

Yet, as the dust settles, the big question remains: is there anything more left on the table for taxpayers? While some experts believe the government has already stretched its fiscal space and that major tax relief may pause for now, others argue that there is still room for meaningful fine-tuning rather than outright giveaways.

With the new income tax code in place and GST reforms largely stabilised, policymakers may now have the bandwidth to focus on structural improvements, targeted reliefs, and long-pending rationalisation across the tax ecosystem.

From housing-related exemptions and retirement savings to tax certainty for investors and transparency in administration, expectations are steadily shifting from lower taxes to better, fairer, and more predictable taxation.

1. Tax certainty for foreign multinationals

“The introduction of the new income tax code and GST reforms has left space for the government to focus on other key aspects of India’s tax regime. Tax certainty for foreign multinationals and customs reforms are critical areas for the upcoming budget,” said Sanjiv Malhotra, Senior Advisor – Head of Tax Practice, Shardul Amarchand Mangaldas & Co.

He added, “Tax certainty has been a long-standing demand from foreign investors. The recent Tiger Global Supreme Court judgement shook the global investor community. It is crucial for the government to revamp the existing tax dispute resolution and avoidance framework across income tax, GST, and customs. While Advance Pricing Agreements have worked well, other advance ruling processes need an overhaul to deliver the certainty investors seek.”

2. Gold investors await relief in Budget 2026

Ronak Morjaria, Partner at ValueCurve Financial Services suggests, “The holding period for Gold Funds and Physical Gold should also be reduced to one year to qualify as long-term assets. The government should also consider restarting Sovereign Gold Bonds (SGBs), which offered tax-free returns and were extremely popular among investors.”

3. Faceless model for customs

“Similarly, on the customs front, the government should replicate the faceless model used for income tax to reduce discretion and taxpayer harassment. At this stage, India does not need lower taxes; it needs a more efficient and predictable tax regime,” said Sanjiv Malhotra.

4. Rationalising cryptocurrency and professional taxation

Gains from Virtual Digital Assets (VDAs) are taxed at 30%, but losses cannot be offset against gains from similar assets.

Abhishek Soni, CEO & Co-founder of Tax2win, said, “Not allowing loss set-off in crypto taxation goes against basic tax principles and discourages transparent reporting. Allowing losses to be set off against VDA gains would improve fairness without weakening compliance.”

5. HRA benefits

Archit Gupta, Founder & CEO of ClearTax, said, “Inclusion of more developed cities in the metro category would provide much-needed relief and make HRA exemptions more equitable across India.”

Currently, HRA exemption is capped at 50% of salary for metros and 40% for non-metros, a structure increasingly out of sync with reality.

Income Tax Calculator

1

Basic details

2

Income details

3

HR & other allowances

4

Deductions

5

Summary

Basic details

Financial year

FY 2025 - 2026

New

Age group

0 - 59 yrs

My city is a

Metro

Continue

6. Standard deduction

7. Extending Section 87A rebate to equity capital gains

The Section 87A rebate currently excludes equity capital gains.

Abhishek Soni notes, “Small investors should not be left out of basic tax relief. Extending 87A to equity gains would support retail investors and promote wider market participation.”

8. Section 80C

Currently, Section 80C allows deductions up to ₹1.5 lakh for certain tax-saving investments, but only for those in the old tax regime. Taxpayers in the new regime cannot claim 80C benefits.

9. Increasing home loan interest deduction

The current limit of ₹2 lakh under Section 24(b) is increasingly inadequate.

Abhishek Soni explains, “With rising property prices, the existing cap has lost relevance. Raising it to ₹3 lakh would make the deduction more meaningful for homeowners.”

10. Real-time income tax refund tracking

To improve transparency and reduce taxpayer anxiety, Deloitte India has proposed a real-time refund tracking dashboard on the taxpayer portal as part of recommendations for Budget 2026–27.

11. Making the new tax regime more lucrative

12. Strengthening NPS benefits for retirement planning

The National Pension System (NPS) is a vital retirement savings tool but offers limited tax incentives.

Abhishek Soni says, “Stronger tax incentives can encourage early retirement planning. We expect an increase in the additional NPS deduction under Section 80CCD(1B) to ₹1 lakh, availability of NPS benefits under the new regime, and simpler tax treatment on withdrawals.”