Union Budget Expectations 2026

1. Shift to the New Regime: The government has been steadily encouraging a shift towards the New Tax Regime. Experts suggest that the upcoming budget might take steps to remove certain deductions from the Old Tax Regime or even removing it entirely in the future.

Given that significant relief was provided previously by raising the no-tax income threshold to Rs.12 lakh, massive changes to the basic exemption limits are not expected. However, there is a strong demand to rationalise the higher tax brackets which currently impact middle-income earners significantly.

1. Deductions and Limits: Despite the focus on a simplified tax structure, there are specific demands for increased deduction limits to help with inflation and they are mentioned below: 

1. Standard Deduction: There is a widespread expectation for the standard deduction for salaried employees to be raised to Rs.1 lakh.

1. Section 80C: Taxpayers are hoping for an increase in the Section 80C deduction limit from Rs.1.5 lakh to Rs 3.lakh. The increase would encourage long-term savings. 

1. Capital Gains: Investors are looking for relief on Long Term Capital Gains (LTCG) for listed securities, with requests to increase the exemption limit from Rs.1.25 lakh to Rs.2 lakh.

1. Surcharge and Senior Citizens: High-net-worth individuals are hoping for a revision in surcharge slabs. Proposals include increasing the threshold for the 10% surcharge from Rs.50 lakh to Rs.75 lakh, and the 15% surcharge from Rs.1 crore to Rs.1.5 crore.

Additionally, with interest rates falling, there is a plea for better tax slabs for senior citizens to provide them with more liquidity and financial ease.

Manufacturing and Parity

To sustain economic momentum, the corporate sector has its own set of wishes that are focused on growth and equity.

1. Boosting Manufacturing: To further the Make in India initiative, there is an expectation of lower tax rates for manufacturers. This would help in domestic production and increase in foreign investments.

1. Parity for LLPs: Limited Liability Partnerships (LLPs) are seeking tax parity with companies. Currently, LLPs are often taxed at higher effective rates than corporate entities.

Economic Policy

Beyond taxes, the 2026 Budget is expected to come with various changes for India's technological future. There is a strong push for targeted policy support for Artificial Intelligence (AI), robotics, and data centres.

1. Data Centres: As the backbone of the digital economy, data centres require fiscal incentives, rationalised power tariffs, and easier land approvals to scale up. 

1. AI and Robotics: Budgetary support for Research and Development (R&D) in AI and robotics is crucial. This would help India move from being a consumer of technology to a producer of global solutions.

Diversifying Services Exports

Historically, India’s services exports have been dominated by IT outsourcing. The goal now is to diversify into higher-value digital and knowledge-based services. By supporting high-tech sectors, the government aims to protect the economy against global trade volatility and reduce dependence on traditional markets.

Conclusion

The Union Budget 2026 is expected to be a balancing act. On one hand, it must address the immediate financial concerns of the salaried class and senior citizens through rationalised tax slabs and deductions. On the other, it must invest aggressively in the infrastructure of tomorrow, AI, data centres, and robotics, to ensure India remains competitive on the global stage.