Dinesh Kanabar, Chairman & CEO, Dhruva Advisors, says "The Union Budget to be presented on 1 February 2026 comes at a rather unique juncture in India’s tax history. The new Income Tax Act, 2025 is scheduled to come into force from 1 April 2026. This legislation was the outcome of an extensive consultative process, including the constitution of a Parliamentary Committee, wide stakeholder representations, and detailed deliberations before the Bill was finally enacted. In this backdrop, one would ordinarily expect that this Budget would carry no substantive proposals on direct taxes, particularly amendments to a law that has not yet come into effect. Any tinkering with the framework at this stage would undermine the very purpose of introducing a clean-slate legislation."

Sandeep Bhalla, Partner, Dhruva Advisors, says, "The industry’s suggestion to waive TDS/TCS on transactions already subject to GST is well-intentioned and addresses genuine compliance challenges arising from multiple rates and frequent mismatches. Since GST provides a robust, centralised trail of transactions, some degree of duplication in reporting and tracking can indeed be reduced. However, TDS and TCS also serve as critical advance tax collection and information-gathering tools for the exchequer. A blanket withdrawal could result in a significant short-term revenue loss and potential cash-flow impact for the government, particularly in sectors with thin margins or historically lower tax compliance. Any rationalisation, therefore, must be calibrated and selective, balancing ease of compliance with the need to safeguard revenue and prevent leakage."

Tax benefit for contribution to Tier-II account is available under Section 80C of the Income-tax Act, 1961 to only employees of the central government, and that too with three years’ lock-in for those who have opted for the old tax regime. Given that Tier-2 functions more like a market-linked investment product, experts argue that returns should be taxed as capital gains rather than regular income. "There is an urgent need for clarity on the taxation of NPS Tier-2 accounts. Since Tier-2 functions like a regular investment product, it should be treated as a capital asset for tax purposes," says Balwant Jain.

Tax experts say taxability with respect to ESOPs arises in the hands of employees on allotment of shares after the exercise of ESOPs. This leads to double cash outflow for the employees: First, due to investment in the exercise price of the shares and second, due to tax liability. Read more

CA Dr Suresh Surana says the rebate available under section 87A is presently restricted to income taxed at normal slab rates and does not extend to income chargeable at special rates. "It is suggested that the rebate under section 87A be extended to include tax payable on income chargeable under sections 111A and 112A, at least up to the specified income threshold." AMFI and various other tax experts have also suggested the same.

The maximum limit under Section 80C has seen only modest increases over time. In 2003, the deduction cap was ₹1 lakh. In 2014, then‑Finance Minister Late Arun Jaitley raised the limit to ₹1.5 lakh to provide some relief to taxpayers, but no further increase has been made since then. “With the rising cost of living and the increasing financial burden on taxpayers, the Section 80C limit should be raised further, and it could be increased to ₹3.5 lakh to better align with the current economic conditions,” said Mumbai‑based tax and investment expert Balwant Jain.

Under the current tax regime, long-term capital gains on equity and equity-oriented mutual funds are taxed at 12.5% on gains exceeding ₹1.25 lakh in a financial year. AMFI has proposed raising this tax-free threshold to ₹2 lakh. In addition, the industry body has suggested a complete exemption on LTCG arising from equity mutual fund investments held for more than five years, in order to promote long-term wealth creation.

Tax experts have suggested raising the standard deduction limit under old and new tax regimes. “Given rising living and work-related expenses, the standard deduction should be increased to ₹1,00,000,” said Abhishek Soni, CEO & Co-founder, Tax2win, adding that defence personnel should get a higher deduction.

Tax experts are hoping for clarity in perquisite valuation in case of housing accomodation and cars from Budget 2026. They have suggested the following:

1. Proper valuation base for housing accommodation perquisite

2. Clarity on perquisite valuation for electric vehicles

Experts at the American Chambers of Commerce in India (AMCHAM) have suggested increasing the tax-saving investment limit to at least ₹2.5 lakh under Section 123. This, they say, should be done to reduce the burden on taxpayers in view of inflation. Under the existing tax rule, the deduction in respect of life insurance premiums, deferred annuity, contributions to employees' provident fund, subscription to ELSS schemes etc, are allowed under the old regime but only for up to ₹1.5 lakh. "Currently, deduction under Section 80C of the Act for payments/investments towards life insurance premia, contributions to provident fund, subscription to certain equity shares or debentures, etc. is capped at ₹1,50,000," AMCHAM experts said in their pre-budget memorandum. Read more

Calculate your tax liability below:

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

The Bombay Chambers of Commerce and Industry (BCCI) has recommended that in case of any industry specific issues or any other common contentious issues, a guidance note/circular shall be provided by the Income Tax Department just like the circular on FBT, the Handbook on negative service tax regime, etc. which clarifies most of the doubts of the assesses. This will bring clarity and certainty in respect of various issues and reduce the litigation and save time for both the assessee as well as the Department.

According to CA Dr Suresh Surana, there is a double taxation of income in case of companies with respect to dividends: Firstly, the companies are required to pay corporate tax, and then the shareholders pay tax on the dividends. In case of resident individual shareholders, the tax on dividends can be as high as 35.88%. On the other hand, non-residents are liable to tax on dividends @ 20% (plus surcharge and cess) which may further be lowered by Double Tax Avoidance Agreements to 5%-15%.

He suggests that Budget 2026 should fix the maximum tax on dividends distributed by domestic companies in case of resident shareholders to 20% (plus surcharge and cess). This will help reduce "the cascading effect of double taxation".

Ahead of Union Budget, we talked to multiple industry experts about that the Middle Class can expect from the Government in this Budget. They have suggested at least eight expectations that the Middle Class can have. Here are four of those expectations:

1. Relief from rising prices

2. Tax relief for salaried and pension earners

3. Employment and income security

4. Affordable healthcare and education

"Therefore, it would be appropriate to align the deduction limit under section 80TTB be enhanced to Rs. 100,000 to provide relief to senior citizens."

• Tax treatment for interest on deposits should be at par with LTCG and STCG

• Lock-in period for Tax savings FD may be made equal to ELSS of Mutual funds (3 years) to encourage deposit mobilization into banks

• No TDS on Savings Bank Deposits interest

• In line with NPS deduction under 80CCD(1B), a separate deduction for Term/Health insurance in the new/Old tax Regime, say ₹25,000/50,000 Else, include 80D deduction in new tax regime

• Mandatory NPS deductions for private sector employers above certain thresholds like 100/200 employees

• An increase in deduction limit for NPS Vatsalya under Section 80CCD(1B) for NPS contributions

• Interoperability of EPFO and NPS subscribers