Union Budget 2026 Expectations

The Union Budget 2026 is set to be presented on 1st February. As the announcement approaches, expectations are building across industries, businesses, and taxpayers. From tax reforms to sector-specific support, stakeholders are closely watching what the government may prioritise this year.
 

Here are some key expectations highlighted by industry experts and stakeholders:

• GST Rationalisation & Business Support
  Industry bodies are pushing for simplified GST structures and policy support to improve ease of doing business.
• Income Tax Changes
  Experts expect minimal changes in tax slabs, especially with the new Income Tax framework set to be implemented from April 2026. However, smoother transition and simplification of provisions are anticipated.
• Relief for Middle-Class Taxpayers
  There is demand for further tax relief to offset inflation. Suggestions include increasing the standard deduction to Rs. 1,00,000 and revising the threshold for the 30% tax slab.
• Export & Investment Boost
  With currency pressures and global trade challenges, the government may introduce measures to boost exports, encourage import substitution, and attract foreign portfolio investments.
• Capital Gains Simplification
  Stakeholders are seeking a simpler capital gains structure, including uniform holding periods and harmonised tax rates across asset classes.
• Dispute Resolution Scheme
  A one-time settlement scheme may be introduced to resolve pending tax disputes, helping unlock significant funds stuck in litigation and improving business liquidity.
• Revision in Section 80C & 80D Limits
  There is growing demand to increase the Rs. 1.5 lakh limit under Section 80C and enhance deductions for health insurance under Section 80D, especially for senior citizens.
• Changes in Capital Gains Exemption
  Experts suggest increasing the exemption limit for long-term capital gains on equities beyond Rs. 1.25 lakh and revisiting indexation benefits for assets like real estate and debt instruments.
• Custom Duty Adjustments
  The budget may include reduced duties on key raw materials to support manufacturing and MSMEs, along with selective increases on finished goods to promote domestic production.
• Focus on Key Sectors
  Sectors such as EVs, renewable energy, semiconductors, defence, and electronics may receive targeted incentives under initiatives like Make in India.
• Stable Corporate Tax Environment
  Analysts expect corporate tax rates to remain stable, along with continued incentives for startups and investments in digital and green infrastructure. 

One of the most significant Union Budget 2026 changes is the revision of tax slab rates under the new regime. With a basic exemption limit of Rs. 3,00,000, the income tax rates start from 5% and go all the way up to 30%. Let’s check them out:

As per the government, this revision of rates reduces the overall income tax liability and enhances disposable income. Additionally, taxpayers with a taxable income up to Rs. 7,00,000 are also allowed a maximum rebate of Rs. 25,000 under Section 87A.

Also Read: Common Budgeting Mistakes

In the Union Budget 2024, the government has also simplified the taxation of capital gains. For the unaware, capital gains arise when you sell a capital asset for a profit. This profit is taxed under the Income Tax Act based on its type (listed or unlisted) and asset holding period (short-term or long-term). Let’s understand in detail:

• Changes in holding period
  As per the latest Union Budget 2026 changes, “listed financial assets” (such as equity shares and equity-oriented mutual funds) are considered long-term if held for more than one year. For “unlisted financial assets" and non-financial assets like real estate, they must be held for at least two years to qualify as long-term.
• Short-term capital gains (STCG)
  STCG arising from the sale of equity-related investments will be taxed at a 20% tax rate. However, for all other types of financial and non-financial assets (such as debt mutual funds and unlisted debentures), STCG will be taxed at the applicable slab rates.
• Long-term capital gains (LTCG)
  Long-term capital gains for all types of assets are taxed at 12.5%. For equity-related investments, the exemption limit for capital gains is set at Rs. 1.25 lakh per year. Be aware that only the amount exceeding this threshold will be taxed at 12.5%.
  However, the benefit of indexation has been removed. Now, taxpayers cannot adjust the purchase price of their capital assets for inflation.
• Tax on unlisted bonds and debentures
  Unlisted bonds, debt mutual funds, and market-linked debentures will be taxed as per the applicable slab rates, irrespective of their holding period.

Also Read: Types of Budgets

The standard deduction is a fixed amount that is subtracted from the income computed under the head salary. This deduction has been increased from Rs. 50,000 to Rs. 75,000. As a result, more of your income will be tax-free, which will lower your income tax liability and enhance your TDS refunds.

Also Read: Bonus Stripping

As per the latest Union Budget 2024 changes, the government has increased the Securities Transaction Tax (STT). For the unaware, it is a tax you pay when buying or selling securities. In the futures and options (F&O) market, the STT for selling options has been raised from 0.0625% to 0.1% of the option premium. This means traders will now pay more tax when selling options.

On the other hand, when selling futures, the STT has gone up from 0.0125% to 0.02% of the futures’ trading price. This increase will also lead to higher costs for traders in the futures market.

The government has introduced an 'Employment Linked Incentive scheme' to support individuals who are starting their first job. Under this scheme, the government will pay the first month’s salary of these new workers as a form of financial aid. This payment will be up to Rs. 15,000 and will be distributed in three instalments. A direct benefit transfer (DBT) will be made to the individual’s bank account.

The idea behind this initiative is to encourage employment and provide some immediate financial relief to those entering the workforce for the first time.