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.