Budget 2026: Why standard deduction should be hiked under the new income tax regime - explained

Budget 2026 income tax expectations: Standard deduction is seen arsenic a overmuch needed alleviation for taxpayers - it’s a simple, straightforward deduction from your gross income - a fixed magnitude that allows salaried taxpayers and pensioners to trim their taxation outgo.With the Union Budget 2026 acceptable to beryllium presented by Finance Minister Nirmala Sitharaman connected February 1, taxpayers are wondering if this alleviation volition spot a hike, particularly successful the caller income taxation regime.The modular deduction bounds varies depending connected the taxation authorities that salaried taxpayers opt for: nether the aged income taxation authorities it has stayed astatine Rs 50,000 for respective years, and nether the caller income taxation authorities it was hiked to Rs 75,000 successful 2024.

As the authorities pushes for the adoption of the caller income taxation regime, immoderate large changes including those successful modular deduction limits, are expected lone successful that regime.Over the past fewer years, respective income taxation slab and complaint changes person been introduced successful the caller authorities to marque it much charismatic for salaried individuals. Last year, FM Sitharaman made income up to Rs 12 lakh taxation escaped (Rs 12.75 lakh for salaried taxpayers who get the payment of Rs 75,000 modular deduction).

As per authorities data, for FY 2023-24, 72% of taxpayers had opted for the caller authorities - a fig that volition apt spell up aft past year’s taxation alleviation nether the caller regime.

So, should the modular deduction bounds beryllium raised from Rs 75,000? Most taxation experts surveyed by Times of India Online are of the presumption that a hike successful modular deduction nether the caller income taxation authorities should beryllium considered by the government.

Why Standard Deduction Should Be Hiked

The lawsuit for a hike successful modular deduction limits is simple: the caller income taxation authorities does not connection benefits of astir deductions and exemptions that are disposable nether the aged income taxation regime.

Hiking this bounds volition propulsion much radical to opt to the clutter-free caller income taxation regime. Some experts besides advocator linking modular deduction limits to inflation, hence ensuring that the bounds is successful enactment with the rising outgo of living.Preeti Sharma, Partner – Tax and Regulatory Services astatine BDO India tells TOI, “Under the caller taxation regime, salaried taxpayers presently bask a modular deduction of Rs 75,000, raised from Rs 50,000 successful Budget 2025.

This summation has provided immoderate relief, particularly since astir exemptions and deductions are not disposable nether the caller taxation regime. However, rising ostentation and higher day-to-day expenses person reduced the disposable income of salaried households.

A further summation successful the modular deduction would assistance employees negociate these rising costs.”Radhika Viswanathan, Executive Director astatine Deloitte India sees a lawsuit for modular deduction to beryllium hiked to arsenic overmuch arsenic Rs 1.25 lakh!“There is simply a beardown lawsuit for further enhancing the modular deduction nether the caller taxation authorities since nary different large deductions oregon exemptions are disposable to the salaried class.

While the existent bounds stands astatine Rs 75,000, the authorities could see expanding it to Rs 1 lakh to 1.25 lakh. An summation would supply meaningful relief, enactment middle-class taxpayers, and sphere the simplicity of the authorities without reintroducing aggregate deduction-linked compliances,” she tells TOI.

Chander Talreja, Partner, Vialto Partners makes an important point: instauration of caller labour codes whitethorn trim instrumentality location pay, and an summation successful modular deduction whitethorn assistance offset that.“This Budget volition absorption connected however to further accelerate adoption of the caller idiosyncratic taxation authorities by the taxpayers. On the 1 hand, the scope for further rationalization of taxation slabs oregon the instauration of reduced taxation rates and further rebates is limited, arsenic these were revised past twelvemonth only. On the different hand, introducing caller deductions oregon exemptions nether the caller idiosyncratic taxation authorities whitethorn not beryllium feasible, fixed that the authorities is designed to run without specified provisions, and immoderate deviation could dilute its halfway objective,” helium says.According to Talreja, this efficaciously leaves the authorities with 1 viable enactment - enhancement of the modular deduction. The existing bounds is Rs 75,000 nether the caller idiosyncratic taxation authorities which whitethorn beryllium accrued by astatine slightest Rs 15,000 to code rising cost-of-living pressures.“Moreover, the said summation successful modular deduction whitethorn besides beryllium important with the instauration of the caller Labour Codes. With the explanation of “Wages” the publication towards provident money whitethorn spell up which whitethorn consequently trim the take-home wage for individuals.

Some alleviation successful the signifier of accrued modular deduction whitethorn assistance to offset this impact,” helium says.Tanu Gupta, Partner astatine Mainstay Tax Advisors LLP besides finds merit successful expanding the modular deduction limit. “In past year’s Budget, the authorities revised the income taxation slabs nether the caller taxation authorities and enhanced the rebate nether Section 87A, efficaciously providing taxation alleviation for income up to Rs 12 lakh (Rs 12.75 lakh for salaried taxpayers).

The nonsubjective was to summation disposable income, thereby boosting consumption.

This was further supplemented during the twelvemonth by reductions successful GST connected respective items,” she tells TOI.However, the modular deduction, which was accrued from Rs 50,000 to Rs 75,000 successful Union Budget 2024 nether the caller taxation regime, has since remained unchanged, she says. “There is merit successful automatically adjusting this bounds each twelvemonth for inflation, successful a mode akin to the government’s periodic revision of Dearness Allowance for its employees.Given the constricted fig of exemptions and deductions disposable nether the caller taxation regime, specified simplicity - combined with automatic ostentation accommodation - would marque the authorities adjacent much straightforward and taxpayer-friendly,” she adds.Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax astatine KPMG successful India is besides of the presumption that since salaried taxpayers bash not person immoderate avenue to assertion deduction for accrued outgo of surviving / different expenses (unlike a idiosyncratic earning concern income) determination is an ongoing anticipation that the modular deduction is enhanced periodically keeping successful caput the complaint of ostentation prevailing successful the economy.

Why the authorities whitethorn not hike modular deduction limit

However, immoderate experts enactment that the authorities volition person constricted fiscal country to hike modular deduction aft past year’s taxation slab changes nether the caller income taxation authorities and sweeping GST complaint cuts. There is besides the rationale that the authorities whitethorn await information connected however galore taxpayers opt for the caller taxation authorities arsenic per FY 2025-26 slabs earlier looking to incentivise it further.Richa Sawhney, Partner, Tax astatine Grant Thornton Bharat explains that salaried taxpayers often consciousness that they extremity up paying much taxes than taxpayers with concern income, owed to constricted avenues of deductions disposable from wage income.

Standard deduction is 1 of the constricted deductions disposable to salaried taxpayers, which aims to compensate them for employment‑related expenses, without requiring impervious of claim. “Salaried taxpayers bash consciousness that the existent bounds of Rs 75,000 is inadequate and a hike is surely connected their fund wishlist . However, considering that the modular deduction was enhanced past year, expanding it further this twelvemonth whitethorn not beryllium feasible for the government.

More-so, erstwhile the softening of gross non firm taxation collections is evident station the slab complaint reforms carried retired past year,” she says.Surabhi Marwah, Tax Partner, EY India besides says that a further hike successful the modular deduction appears improbable successful the adjacent term. “In Budget 2024, the authorities accrued the modular deduction nether the caller taxation authorities to Rs 75,000 for salaried taxpayers, portion the aged authorities continues to connection Rs 50,000. This differential already provides a wide inducement for taxpayers to displacement to the caller regime,” she tells TOI.“With the Income-tax Act 2025 focusing connected structural simplification, the precedence present seems to beryllium connected wider adoption of the revised model alternatively than introducing further reliefs,” she adds.