Union Budget 2026 Income Tax Expectations: What Taxpayers Want

Union Budget 2026: The Union Budget 2026 arrives at a crucial juncture as taxpayers brace for the rollout of the Income-tax Act, 2025 (ITA 2025) from April 1, 2026. One of the biggest tax reforms in decades, the new law has raised expectations that the Budget 2026 will offer clarity, stability, and a smoother transition for individuals and families planning their finances.

With a new framework around the corner, households are seeking predictability and simpler compliance to avoid uncertainty during the shift to the revamped law.

Union Budget 2026: Push For Simplicity And Digital Ease

India’s personal tax system has steadily moved towards simplification in recent years. The new concessional tax regime was made the default, featuring lower slab rates and fewer exemptions, while capital gains taxation was streamlined across asset classes. For taxpayers, this meant easier filing, reduced paperwork, and clearer choices between regimes.

These changes have coincided with higher participation. Income-tax return filings rose from 8.13 crore in FY 2023–24 to 8.68 crore in FY 2024–25, marking a 6.72% increase. Around 72% of taxpayers opted for the new tax regime in FY 2023–24.

The ITA 2025 further sharpens this push by reducing the number of sections from 819 to 536 and nearly halving the word count of the law. However, experts note that individuals will still need clear guidance. Plain-language FAQs, side-by-side comparisons of old and new provisions, and simple illustrations for salary, rent, and capital gains could turn legal simplification into real time savings for families.

On the digital front, expectations remain high. While prefilled returns, improved dashboards, and faster processing have eased filing, taxpayers want deeper automation- especially comprehensive prefill of capital gains, dividend, and interest income to minimise follow-ups and filing stress under the new law.

Union Budget 2026: VDAs, F&O Trading And Compliance Concerns

With rising participation in virtual digital assets (VDAs), taxpayers are seeking clearer rules on loss set-off and movement across VDA categories, an issue particularly relevant for younger investors. Similarly, increased retail participation in futures and options has pushed many small investors into audit requirements originally designed for full-time traders. Simpler guidance could help prevent misreporting and reduce unnecessary compliance.

Another recurring pain point is tax collected at source (TCS) on foreign remittances, which often locks up funds. While salaried taxpayers can now adjust TCS against salary TDS, those with only interest or dividend income are often unable to do so, leading to refund delays. Combined with pending tax disputes, this has prolonged waiting periods for many households.

Union Budget 2026: Relief For Lower Incomes And Families

Taxpayers are also watching for relief measures at the lower end of the income scale. Under the new regime, individuals earning up to Rs 12 lakh pay no tax due to the rebate, while salaried taxpayers benefit up to Rs 12.75 lakh because of the Rs 75,000 standard deduction. A calibrated enhancement, if announced, could help families cope with inflation without complicating the tax structure.

Separately, the Institute of Chartered Accountants of India (ICAI) has recommended optional joint taxation for married couples, similar to systems in countries like the US and Germany. Currently, spouses must file separately, which can disadvantage single-income households. Allowing joint returns could offer meaningful relief where incomes are uneven, but finances are planned jointly.

Union Budget 2026: Focus On Stability During Transition

As the shift to ITA 2025 approaches, households are seeking clear rules, easy-to-understand guidance, and robust digital support. Addressing administrative bottlenecks- such as TDS and TCS complexities and delays in dispute resolution could go a long way in easing anxiety and ensuring a smoother transition to the new tax regime.

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