Budget 2026: What Tax Reliefs Can Taxpayers Expect from Nirmala Sitharaman’s Budget?

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026 on 1st February. Taxpayers are hoping for reliefs, following last year’s announcement that made annual income up to ₹12 lakh tax-free under the new regime. This year, the focus is likely to be on simplifying tax compliance and offering support to lower-income taxpayers.

Key Highlights and Expectations

1. Simplifying Tax Administration

• The government aims to make tax compliance easier.

• With the Income Tax Act 2025 coming into effect from 1st April 2026, replacing the 1961 Act, the rules will remain largely the same, but the language will be simplified.

• This move is intended to help taxpayers understand tax rules more easily, especially those with limited knowledge of tax procedures.

2. Support for Low-Income Taxpayers

• The government may focus on relief for lower-income groups and encouraging more people to file tax returns.

• Measures could include simpler procedures, reduced compliance burden, or enhanced deductions for smaller earners.

3. Possible Changes in Cryptocurrency Taxation

• Experts expect clarifications and revisions in crypto taxation rules.

• Current framework (introduced in Budget 2022) imposes 30% tax on crypto gains and 1% TDS on transactions.

• This is higher than taxes on equity mutual funds (12.5% long-term, 20% short-term).

• The industry expects the government to address this disparity.

4. Home Loan Tax Benefits

• Current benefits:

  • Interest on home loan: deduction up to ₹2 lakh (Section 24B)

  • Principal repayment: eligible under Section 80C

• Expectations:

  • Possible increase in interest deduction

  • Separate allowance for principal repayment

• Note: Benefits are currently available only under the old tax regime.

5. Deductions for Health and Life Insurance in New Tax Regime

• Taxpayers hope that term life insurance and health insurance premiums will be eligible for deductions under the new regime.

• Rising medical costs and the need for financial protection make these policies essential.

• Currently, these deductions exist only under the old tax regime, but there is expectation for inclusion in the new regime.

Bottom Line

While no major announcement is expected like last year’s ₹12 lakh tax-free limit, Budget 2026 may focus on:

• Simplified tax rules

• Ease of compliance

• Targeted relief for low-income taxpayers

• Clarifications on crypto taxation

• Enhanced benefits for home loans, health, and life insurance

Taxpayers are advised to stay updated and prepare their finances to maximize deductions and benefits.