Union Budget 2026: Income Tax Expectations, New Tax Regime Push and What India Inc Wants
Union Budget 2026 is set to be presented by Finance Minister Nirmala Sitharaman on February 1, and expectations are running high across households, boardrooms and financial markets.. Even as the focus will be on any relief in personal income tax for the middle class, the Budget is also expected to give clarity on the government’s broader growth strategy covering everything from infrastructure and manufacturing to green energy, artificial intelligence and financial inclusion. More significantly, this year is the introduction of a new Income Tax Act that will come into effect from April 1, initiating a massive change in how the tax structure and communication take place in India.
The Focus is on Income Tax
Income tax announcements are what people await in the Union Budget. For millions of small and middle-class taxpayers across the country, too, the Union Budget is all about income tax announcements. The government has been indicating for some years its intention to simplify the tax system and reduce compliance costs. That narrative has kept hopes high that Union Budget 2026 may deliver some more changes on personal taxation, even if it should be low-impact.
Most tax experts predict continuity, not instability. With inflation moderating and consumption keeping its head high, the government may prefer an incremental approach instead of seeking a sweeping slab change. But any explanation or rationalization, particularly for the salaried class, could still provide a significant relief and spur disposable incomes.
Government’s Persistence in the New Tax Regime
A government spin visible in Union Budget 2026 will be the continued focus on the new income tax regime. Announced in the Union Budget 2020, the regime aimed to provide lower tax rates for foregoing exemptions and deductions, which was an attractive proposition for taxpayers who preferred simplicity over tax planning.
Since then, the government has worked continuously to make this option more appealing. A series of changes occurred in the Union Budget 2025, when up to ₹12 LPA is non-taxable under the new regime. The exemption limit was increased to ₹4 lakh, and the standard deduction for the salary class was raised to ₹75,000, a direct gain to the middle class.
These shifts largely tipped the scales in favour of the new taxing order, and Budget 2026 will likely continue to entrench rather than reverse this direction. While experts predict no radical slab revisions, incremental tweaks to make the new regime more compelling remain a strong possibility.
New Income Tax Act from April 1: What's new and what isn't
Among the big changes stemming from Union Budget 2026 is the bringing into force of the Income Tax Act, 2025, starting April 1. The new law will abolish the 58-year-old Income Tax Act, 1961.
Crucially, the new Act is unlikely to bring too much change in the tax rates or slabs. Rather, the main target is simplicity. The language has been restructured, sections have been rearranged, and redundancy has been eliminated to simplify the understanding and administration of the statute.
The decision has been welcomed by tax professionals, but many caution that the success of the reform will hinge on how clearly the rules are set. According to Jayesh Bavle, CFO of Bertelsmann India Investments, the government’s emphasis lies in bringing in clarity on implementation and compliance rather than making any headline-grabbing tax changes.
Looking Beyond Taxes: Union Budget 2026 and Growth Priorities
Despite the fact that personal tax is all that’s talked about these days, there is a great deal more to the Union Budget 2026 in terms of economic growth. With the industry and investors having certain expectations, we anticipate the government to make use of the budget for ensuring policy continuity, encouraging capital spending and remove sector specific impediments.
India Inc prefers targeted measures rather than broad giveaways. Against the backdrop of uneven global growth dynamics and increased geopolitical risks, the focus is well-placed on policies enhancing domestic demand and longer-term competitiveness.
Sectoral Demands: What India Inc Wants
The Union Budget 2026 holds expectations across sectors for long-term capacity building. Renewable energy and clean manufacturing companies are demanding incentives for supporting integrated storage, domestic supply chains and green hydrogen projects. The measures are part of what is considered critical for India in its energy transition and export ambitions.
The electric vehicle and artificial intelligence ecosystems are also seeking policy clarity and fiscal support. Industry leaders believe targeted incentives could accelerate adoption, boost productivity and position India as a technology-driven growth hub.
In the financial sector, NBFCs, particularly gold loan-focused ones, are seeking priority sector lending status to improve credit access in semi-urban and rural markets. This is consistent with the broader objective of harnessing financial inclusion while not sacrificing credit quality.
Infrastructure, Real Estate, and Logistics in Focus
Infrastructure continues to be a linchpin of growth estimates. The developers and logistics entities are calling upon the government to continue a healthy capital expenditure cycle, with special focus on rail modernization, multimodal links and urban infrastructure.
Property developers are seeking policy stability and funding support, saying that growth driven by infrastructure has a direct multiplier effect on demand for housing, as well as employment and consumption. Anything that smooths the sector’s funding constraints or quickens its approvals could have a significant impact.
It’s Fiscal Discipline and Policy Continuity That Count
While there are calls for stimulus and relief, there is also widespread acknowledgment that fiscal discipline will continue to matter. With public indebtedness elevated around the world, policymakers are likely to balance support for growth with prudent fiscal management.
Participants are factoring in how the government synchronises Budget proposals with its medium-term fiscal roadmap. There’s a sense that supporting investor confidence is less about aggressive stimulus and more about predictability and consistency.
What Budget 2026 Must Ultimately Provide
At its heart, the Union Budget 2026 is likely to walk a tightrope. For taxpayers, it needs to build on the gains of the past few years under the new tax regime and provide some clarity as soon as possible after the new Income Tax Act comes into force. For companies, it must bolster areas of growth, capital spending, manufacturing, clean energy and technology without disrupting fiscal steadiness.
Indeed, the prevailing message from stakeholders is that this is a time not for large-scale policy lurches but for careful consolidation. If what Union Budget 2026 achieves is a balance between tax simplification, sectoral support and policy continuity, it can well be the “end of history” platform on which sustained growth may be built in the years ahead.
Also Read: Budget 2026: What Joint Taxation for Couples and Rail Spending Mean for India’s Economy
