Income Tax Budget 2026: Finance Minister Nirmala Sitharaman provided significant relief to taxpayers in the last Union Budget. Taxpayers have high expectations from her this time as well. In particular, they are hoping for the announcement of a new income tax regime and certain deductions.
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Income Tax Budget 2026: With just two weeks remaining before the Union Budget is presented, taxpayers are closely monitoring the Union Budget 2026. Finance Minister Nirmala Sitharaman will present the budget in the Lok Sabha on February 1st. Last year, in the Union Budget, she provided significant relief to taxpayers. She made income up to ₹12 lakh tax-free annually. This provided significant relief to taxpayers, especially middle-class taxpayers. However, some taxpayers still have some complaints regarding income tax rules. Experts say that if the Finance Minister addresses these concerns on February 1st, they will benefit significantly.
Additional deductions on NPS also available under the new income tax regime
Most deductions are not available under the new income tax regime. However, deductions are available on employer contributions to an employee’s NPS account under Section 80CCD(2). Experts say that taxpayers under the new regime should also benefit from the additional ₹50,000 deduction on NPS contributions under Section 80CCD(1B). The government should also increase this deduction to ₹1 lakh. This will increase taxpayer interest in NPS.
Easy Option to Declaring the Old Regime
The government made the new regime the default income tax regime in the Union Budget 2024. This means that if individuals and HUFs wish to use the old regime, they must declare it. They are required to declare this under Section 10-IE. Many individual taxpayers forget to disclose this information or make mistakes in the way they declare it. If the government makes this option available directly in the ITR, this problem could be resolved.
Tax Rules for Lump-Sum Withdrawals in NPS
The PFRDA has recently made several major changes to the NPS. The most significant change concerns the withdrawal rules. Withdrawal rules have been simplified. If a subscriber has up to ₹8 lakh in their fund, they can withdraw the entire amount in one lump sum upon maturity. If the amount exceeds ₹8 lakh, 80% withdrawal is permitted. Previously, the limit was 60%. However, it is unclear whether the additional 20% withdrawal will be tax-free or taxable.
Deduction on Term Life and Health Insurance in the New Regime
Experts say that taxpayers under the new regime should also be eligible for deductions on term life insurance and health policies. This will increase public interest in term and health insurance. Term and health insurance have become essential for every family today. Currently, deductions are only allowed on life insurance and health policies under the old income tax regime.
Joint Income Tax Returns for Husband and Wife
The ICAI has recommended that the government allow husbands and wives to file joint income tax returns. This will reduce the tax burden on families. Currently, husbands and wives are required to file separate income tax returns. The basic exemption limit and tax slabs for joint return filers could be increased. Many countries, including the United States, allow husbands and wives to file joint tax returns.
