The countdown to February 1st has begun. As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026, the air in India is thick with one question: “Will my take-home pay finally increase?”
Following the massive reforms in 2025, which made income up to ₹12.75 Lakh effectively tax-free under the New Tax Regime, the middle class has high expectations. With the 8th Pay Commission discussions gaining momentum and inflation touching daily essentials, here are the three major changes the salaried class is expecting from Budget 2026.
1. Hike in Standard Deduction to ₹1,00,000
Currently, the Standard Deduction stands at ₹75,000. While this was a welcome increase in previous years, 2026 brings new challenges. Medical inflation and rising transport costs have eroded the “real” value of this deduction.
Industry experts and taxpayers are calling for this limit to be raised to ₹1,00,000.
- Why it matters: This is a “flat” deduction, meaning it requires no bills or investment proofs. An increase to ₹1 Lakh would mean that someone earning ₹13 Lakh annually could potentially pay zero tax under the New Tax Regime. It is the simplest way for the government to put more cash directly into the hands of the Indian consumer.
2. Rationalization of the 30% Tax Slab
One of the biggest pain points for Indian professionals is how quickly they hit the highest tax bracket. Currently, under the New Regime, the 30% tax rate kicks in at ₹24 Lakh. While this is better than the Old Regime’s ₹10 Lakh limit, it still feels punitive for high-performing young professionals.
There is a strong demand to push the 30% threshold to ₹30 Lakh or even ₹40 Lakh.
- The Logic: By letting the “creatives and builders” of India keep more of their high salaries, the government can trigger a massive boost in consumption for premium housing, automobiles, and the tech sector.
3. Bringing Home Loan Relief to the New Regime
The New Tax Regime is simpler, but it has one major flaw for the Indian middle class: it doesn’t offer benefits for home loan interest (Section 24b).
In 2026, with property prices in Tier-1 cities like Mumbai, Bangalore, and Gurgaon reaching record highs, the “Housing for All” mission needs a boost. Taxpayers are hoping for:
- A dedicated deduction for home loan interest within the New Regime.
- Or, an increase in the Old Regime’s limit from ₹2 Lakh to ₹3 Lakh to offset rising EMIs.
The Tapping Money Verdict: Wait Before You Invest
If you are planning to lock your money into ELSS, Insurance, or PPF just to save tax, stop. With the government clearly favoring the New Tax Regime, there is a high chance that the Old Regime will receive no new benefits, or worse, be phased out further. Wait until the Feb 1st announcement. If the New Regime gets the rumored hike in Standard Deduction, your “tax-saving” investments in the Old Regime might become “locked” money that provides no actual tax benefit.
What is the one change YOU want to see in the 2026 Budget? Tell us in the comments below!
