Budget 2026 Expectations: Tax Relief, Growth Focus and Policy Priorities Ahead of Feb 1 Speech

With the Union Budget 2026 set for presentation on 1 February, Finance Minister Nirmala Sitharaman is under pressure to deliver a blend of tax relief, growth-oriented spending and structural reforms. Ahead of the speech, industry bodies and analysts have outlined key expectations that reflect competing priorities for individuals, businesses and the broader economy.

On the personal tax front, many experts expect tweaks rather than sweeping changes. There is widespread anticipation of a **higher standard deduction — possibly up to ₹1 lakh — and fine-tuning of income tax slabs to ease the burden on those earning between ₹12 lakh and ₹20 lakh, helping middle-class taxpayers cope with inflation and living costs. Other proposals include raising the long-term capital gains (LTCG) tax-free limit and increasing health insurance deductions.

Industry groups, including JM Financial and real estate associations, are pushing for broader concessions under the new tax regime, such as rationalised slabs and enhanced home loan interest deductions, which they say would support housing demand and household finances. There are also calls for policy support for sectors like railways, infrastructure, MSMEs, renewable energy and AI, which are seen as engines of growth and employment.

Economists surveyed by Reuters broadly expect the government to stay on a fiscal consolidation path, aiming to reduce the fiscal deficit — potentially around 4.2–4.3% of GDP — while maintaining high capital expenditure to boost growth. This reflects a balancing act between prudence and investment in key sectors amid slower revenue growth after recent tax cuts.

Other experts have suggested administrative reforms, including faster tax dispute resolution and improved certainty in transfer pricing, to enhance India’s investment climate and reduce litigation. Such reforms are seen as necessary to attract both domestic and foreign capital.

Ahead of Budget 2026, India’s tax policy landscape is also shaped by recent structural changes: the Income-tax Act, 2025 is set to replace the decades-old 1961 law from April 2026, promising simpler tax rules and reduced compliance burdens. With these reforms underway, significant direct tax changes in the upcoming budget are expected to be cautious and targeted rather than revolutionary.

As attention shifts to the Feb 1 speech in Parliament, households, businesses and investors alike are watching closely for announcements that could influence everything from disposable incomes and investment returns to growth prospects in key sectors of the economy.