With the presentation of the Union Budget 2026 just around the corner, anticipation is running high—especially among the country’s middle-class taxpayers. As every year, all eyes are on Finance Minister Nirmala Sitharaman, with hopes that the budget will bring meaningful relief amid rising inflation and increasing compliance requirements.

This year is particularly important as the new Income Tax Act, scheduled to come into effect from April 1, is expected to overhaul several aspects of the taxation system.

One major change under the new law is the replacement of the terms “previous year” and “assessment year” with a single term—“tax year.” This move is expected to significantly reduce confusion and make tax filing more taxpayer-friendly.

Greater Emphasis on Transparency and Compliance

The new Income Tax Act focuses strongly on data accuracy and transparency. Going forward, taxpayers may be required to provide detailed disclosures related to:

• House Rent Allowance (HRA)

• Home loan interest

• Deductions under Sections 80C and 80D

These details will likely be cross-verified with Form 26AS and the Annual Information Statement (AIS). This highlights the government’s push to curb tax evasion through technology-driven compliance and better data matching.

Demand for Simplification in Capital Gains and TDS

One of the biggest concerns for investors is the complex capital gains tax structure. Multiple holding periods and different tax rates often make investment decisions confusing. The middle class is hoping the government will simplify these rules in Budget 2026.

Similarly, there is a growing demand to rationalize Tax Deducted at Source (TDS) provisions. With numerous categories and varying rates, taxpayers want a simpler structure—especially for transactions where GST is already applicable.

Need for Procedural Clarity

India’s tax system is currently burdened with a large backlog of appeals, reflecting the complexity of existing laws. While the new Income Tax Act is set to be implemented soon, there is still uncertainty regarding:

• Return forms

• Filing procedures

• Operational guidelines

Taxpayers expect the government to provide clear and timely guidance in Budget 2026 to ensure a smooth transition and reduce litigation.

Hope for Relief Under the New Tax Regime

With inflation squeezing household budgets, the middle class is strongly hoping for relief under the new tax regime. Key expectations include:

• An increase in the basic exemption limit

• A higher standard deduction

• Inclusion of select exemptions in the new regime

• Expansion of tax slabs to boost take-home salary

If these measures are announced, they could significantly improve disposable income and make the new tax regime more attractive for salaried taxpayers.