With Budget 2026 less than a week away, the conversation around income-tax has shifted from big announcements to practical concerns. For many middle-class households, the focus is on whether the coming year will bring clarity, predictability and fewer compliance surprises, especially with a new income-tax law set to take effect from April 1.
The transition to the Income Tax Act, 2026, is already shaping expectations. One of the most visible changes under the new law is the move to a “tax year” system, which replaces the long-standing distinction between “previous year” and “assessment year”.
Ready for tax-year system?
Aligning the year of earning income with the year of reporting and assessment is intended to make compliance more intuitive, an tax expert said.
Revised return forms will require more granular disclosures for deductions such as HRA, home loan interest and claims under Sections 80C and 80D, all of which will need to be reconciled with AIS and Form 26AS data, reflecting a sharper, data-led compliance framework, she said.
Among salaried taxpayers, expectations from the Budget remain modest but specific. Another tax expert said the middle class is in urgent need of meaningful relief rather than symbolic tweaks. She pointed to the standard deduction as an area where relief could be felt immediately, noting that the Rs 2 lakh cap on home loan interest has remained unchanged for years despite rising property prices.
She also highlighted capital gains taxation as a pain point, arguing that the current structure remains complex and in need of simplified holding periods and rationalised rates. On compliance, she questioned the logic of multiple TDS categories and rates, especially where transactions are already covered under GST.
New law worries
Concerns around readiness for the new law are also growing. Another tax expert draws the attention to operational strain within the tax system, with over 5.49 lakh appeals pending before appellate authorities.
She said the challenge is not the new law but the lack of clarity around forms, filing procedures and implementation guidelines so close to the rollout date. Without adequate transition support, even honest taxpayers could slip into non-compliance unintentionally, Jaiswal said.
Another tax expert said, “The middle class is looking for realistic relief measures such as an increase in the basic exemption limit, widening of tax slabs and enhancement of the standard deduction. She added that reintroducing select deductions under the new tax regime could help improve disposable incomes, particularly at a time when the cost of living continues to rise.”
Market participants are also watching for clarity on capital market taxation. Another tax expert said taxpayers are expecting clearer guidance on the applicability of rebates under Section 87A to capital gains. Such clarity, he said, could ease tax burdens for investors and encourage broader participation in capital markets, which have seen steady growth in recent years.
For salaried taxpayers, however, the immediate focus remains on take-home pay. Another tax expert said expectations from Budget 2026 are centered on making the new tax regime more attractive through a higher standard deduction, rationalised slabs and a higher exemption threshold. While sweeping cuts appear unlikely, he said calibrated tweaks that improve net income without straining fiscal discipline could offer meaningful relief to inflation-hit households.
