How Budget 2025 cut the income tax burden and what taxpayers can expect from FM Sitharaman in 2026

Last year’s tax changes revolved around widening the tax-free threshold and restructuring tax slabs, particularly under the new income-tax regime.

In a move aimed at boosting household disposable income and supporting consumption, the government announced that individuals with annual income up to ₹12 lakh would pay no income tax under the new regime. When the standard deduction of ₹75,000 available to salaried taxpayers is factored in, the effective tax-free income limit extended to ₹12.75 lakh for many earners.

According to the official press statement from the Government of India, these changes were designed to provide relief to the middle class and lower the tax burden on ordinary taxpayers.

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On the administrative side, the government also announced reforms, including easier return filing, rationalised TDS (Tax Deducted at Source) thresholds, and a draft Income-tax Act overhaul to replace the decades-old 1961 Act.

As the fiscal year 2026 budget season approaches, expectations are evolving. While most experts believe another large-scale rate cut is unlikely, discussions are centring on refinements to the existing regime, simplification of tax rules, and targeted relief for specific groups such as senior citizens, small businesses and savers.

Industry voices and economists are also calling for measures to strengthen compliance systems and make India’s tax framework more attractive for both domestic and foreign investors.