The Union Budget 2026 is expected to focus on economic stability, encouraging public consumption and prioritizing faster and simpler compliance mechanism, manufacturing, agriculture, green energy, MSMEs, AI and robotic technologies. The Finance Minister will present the Budget 2026 on 1 February, Sunday.

For real time updates and latest developments, follow our live page for Budget 2026.

Union Budget 2026: Key Expectations and Focus Areas

1. Income Tax Changes — Key Expectations

i. Income Tax Slab Updates

Expectation

• Significant relaxations in the income tax slabs under the new regime is less likely.

Reason

• Budget 2025 and 2024 has given considerable tax concessions and rebates.
• The Union Budget 2024 has relaxed the slab rates under the new regime, and budget 2025 has further relaxed the slab rates, making salary income up to Rs. 12.75 lakhs practically tax-free.

ii. Standard Deduction

Expectation

• Standard deduction may be increased from Rs 75,000 to Rs 1 lakh under the new regime.

Reason

• To increase taxpayer's disposable income and keep pace with inflation

iii. Old v/s New Tax Regime

Expectation

• Old tax regime is expected to continue for the next few years.

Reason

• As the returns filed under the new regime keeps increasing, the old regime may be abolished in the near future.
• But it is not expected to be abolished in the upcoming budget, as many taxpayers still file their returns under the old regime.

iv.Increased benefit to Senior Citizens

Expectation

• Maximum ceiling limit for deduction under section 80TTB may be increased from Rs. 50,000 to Rs 1 lakh.
• New regime may allow certain benefits to senior citizens.

Reason

• Section 80TTB deduction limit was last revised many years ago. 
• Relaxation expected in deduction limit and slab rates to keep pace with the inflation and increase senior citizen's disposable income.

v. TDS Rationalization

Expectation

• Multiple TDS rates may be reduced to 2-3 broadly classified TDS rates.

Reason

• Complications in deciding TDS rates for various transactions.

vi.Streamlining Gold Taxation

Expectation

• Presently, different forms of gold investment is taxed differently due to holding period differences.
• The upcoming budget may bring uniformity in tax treatment of gold.

Reason

• To simplify the compliance process, remove arbitrage in gold investments.

vii. Home Loan Tax Benefits

Expectation

• Maximum home loan interest deduction under Section 24(b) for self occupied property may be increased from Rs. 2 lakhs.

Reason

• The last revision was made many years ago. To encourage home buyers and keep pace with inflation, limits may be increased.

viii. Decriminalization of Income Tax Provisions

• In the 2025 budget, certain provisions, such as non-compliance with selected TCS provisions, were decriminalized. 
• As a continuation, further decriminalization of income tax provisions is expected in the impending budget.

ix. Joint Taxation for Married Couples

Expectation

• This budget may include a recommendation of joint taxation for married couples.

Reason

• To ease the compliance burden in dual income households and make use of the slab rate of both the spouses.

x. Foreign Tax Credit at the TDS deduction stage

Foreign tax Credit

• If an assessee pays tax in two countries for the same income, foreign tax credit can be claimed using relief under section 90 and 90A of the act.
• This situation usually occurs when the income is taxed in both the source country and resident country.

Expectation

• Foreign Tax Credit may be allowed to be considerd at the TDS deduction stage itself.

Reason

• TDS is currently deducted even when Foreign Tax Credit is available, resulting in unnecessary locking of funds, as the credit can only be claimed while filing the ITR.

xi. ESOP Taxation for Relocated Employees

ESOP vesting for Non-Residents

• When the ESOP is vested on the employees, the difference between the market price and the discounted price (vesting price) is treated as a perquisite, taxed as salary income.
• When employees relocate abroad during the vesting period ,  a portion of perquisite arise when he is a non-resident.
• Therefore, ambiguity arises in taxation of ESOP perquisite, which is vested when the assessee is a non-resident.

Expectation

• Clarification in such ambiguity is expected to be clarified.

xii. Increased Depreciation Benefits for Manufacturing Industries

Expectation

• Additional depreciation benefits may be provided for manufacturing industries.

Reason

• The current provisions provide deduction only for the first year of operation, in selected states.
• Increased depreciation deduction can promote the manufacturing sector, promoting 'Make in India' initiative.

xiii. Taxation of Capital Gains on Contingent Consideration

Existing provisions

• In mergers and acquisitions, a portion of the consideration is often contingent on future, uncertain events, namely the company's performance with respect to EBITDA and revenue targets. 
• The current provisions of the act do not address the taxation of capital gains in these situations. 

Expectation

• Clarifying tax provisions on this issue is expected to be a matter of discussion in the forthcoming budget.

xiv. Relaxation of Section 80JJAA

Expectation

• Relaxation is expected in the existing threshold limit under section 80JJAA - deduction for new employees cost.

Reason

• To encourage new job generation.

xv. IFSC Taxation

Expectation

• Extension of tax exemptions available on investments made by NRIs in Offshore Derivative Instruments and Over-the-Counter investments issued by finance companies and dealers as well. Already the exemption is available to the International Banking Units (IBUs).
• Tax exemption on income arising due to transfer pricing adjustments.
• Exemption of TDS compliances on all payments made to IFSCs.

Reason

• To increase India's credibility on tax exemption to IFSCs.
• Simplify the compliances in IFSCs, thereby attracting more foreign investments and business activities in IFSCs. 

2. Indirect Tax 

i. GST Reforms

As GST 2.0 was introduced during the financial year 2025-26, improving tax revenue and tax compliance at the same time, further simplification of GST provisions is expected, especially in the area of Input Tax Credit, to ensure free flow of working capital and ease of doing business in the Indian economy.

ii. Customs and Foreign Trade

Reforms in Customs Litigation 

• Digitalization of customs litigation and the introduction of faster dispute resolution mechanisms can significantly enhance compliance certainty for importers, while improving efficiency and predictability in international trade processes.

Reforms in Tariff Structure

• Simplification and global alignment of customs tariff structure can reduce complexity in duty determination and ease the compliance for both importers and exporters.

Measures for Liberalization of Export Rules

• As a measure to increase global competitiveness in a volatile geopolitical environment, providing additional incentives and benefits for exports may improve overall economic performance and the balance of trade and payments.

Advance Rulings

• Advance rulings are seen as an effective tool for reducing customs litigation in complex matters. 
• Expanding the scope of the same is expected to reduce litigation volume, litigation costs, and the time spent on litigation.

3. Stock Market 

Expectations

• Capital spending(CAPEX) could rise by 10–15% to around ₹12–12.5 lakh crore, with a focus on roads, railways, and urban development.
• The government may increase spending on defence, clean energy, AI, manufacturing, research, and fine-tune incentive schemes for industries.

Reasons

• Higher infrastructure spending can boost cyclical sectors, support economic growth, create jobs, and lead to a market rally after the budget, as company earnings improve.

4. Manufacture & MSME Development

Expectation

• Expanded and faster access to institutional credit, especially for micro and small enterprises (MSMEs).
• Stronger credit guarantee mechanisms to support first-time borrowers and informal businesses.
• Continued focus on last-mile delivery of financial support, ensuring schemes reach smaller towns and rural enterprises.

Reason

• To support domestic manufacturing and improve the global competitiveness of Indian brands.
• To improve working capital stability, and resilience against global volatility

5. Railways

Expectations

• Increased budget allocation to railways is expected in the upcoming budget.
• From Rs 2.52 trillion allocation last year, an approximate 10% increase is expected, coming to Rs 2.75 trillion.
• Focus on increasing capacity, through gauge conversion, track doubling and new lines.

Reason

• Emphasise and improve the safety and protection systems in the railways (KAVACH).
• Aid engineering, procurement and construction (EPC) of advanced coaches, and the Namo Bharat Rapid Rail service.

6. Medical Field

Expectations

• Measures to reduce customs duties on essential medicines, targeted-therapy drugs, and advanced equipment such as robotics and radiotherapy machines. 
• Support for the infra-linked PLI sector is anticipated in the upcoming budget, to increase the number of hospital beds per capita and expand rural healthcare facilities, including funding for tele-medicine.
• Policies aimed at boosting pharmaceutical production, bringing medical devices under PLI 2.0, and reducing import dependence through R&D incentives and GST rationalisation are also expected.

Reason

• To improve affordability and access to advanced health care.
• To support domestic manufacturing and reduce dependence on imported health care equipment.

7. Impact on Agriculture & Agri-Linked Stocks

Expectation

• Agriculture spending may be raised  to ₹1.5 lakh crore
• New Seeds Bill may be introduced. 
• Warehousing facilities for perishable produce may be expanded and modernized.

Reason

• Improving farm productivity, boosting PM-KISAN, quality and contribution of agricultural sector to India's GDP.
  Increased budget supports crop insurance and irrigation.

8. Real Estate Sector

Expectation

• Reducing stamp duty charges and expanding the definition of affordable housing, potentially to Rs. 75–90 lakh.
• Single-window clearances, faster resolution of stalled projects, and granting 'Infrastructure Status' to the sector.

Reason

•  Encourage ownership and boost demand.
•  Enable affordable long-term financing.

9. Encouraging Global Engagement

Expectation

• Strengthen India’s integration with global markets by encouraging foreign investment, technology transfer, and cross-border collaboration. 
• an optional presumptive tax scheme can be introduced for foreign entities engaged in technical consultancy, digital and E-commerce, and management and software.

Reason

• To encourage foreign entities to increase participation in the Indian Economy, 
• Removing operational barriers and improve India's competitiveness as an investment destination.

10. Artificial Intelligence and Robotic Technology

Expectation

• Extending production-linked and infrastructure support to AI, robotics, and deep-tech manufacturing.
• Strengthening digital and compute infrastructure to support AI adoption.
• Encouraging integration of AI across healthcare, logistics, education, and public services.

Reason

• Given their strategic importance, greater budget emphasis is expected on big data, AI, and advanced robotics.

11. Climate change and Green Energy

Expectations

• Accelerated solar manufacturing capacity to reduce import dependence.
• Improved grid integration and energy storage infrastructure to support renewable reliability.
• Continued momentum in green hydrogen and clean industrial energy use.
• Targeted Production Linked Incentive for domestic manufacture of power generation equipment.

Reason

• To make green energy, especially solar power to be more competitive and scalable across India.
• To increase sustainability and address climate change.

i. Clean Mobility and Energy Transition

Expectations

• Expansion of EV charging networks, especially beyond metro cities.
• Support for domestic battery manufacturing and recycling.
• Integration of clean mobility with public transport and urban planning.

Reason

• To promote wider EV adoption and reduce pollution and climate impact.

12. Defense Spending

Expectations

• Higher capital outlay for domestic defense production.
• Stronger linkages between defense, infrastructure, and advanced manufacturing.
• Continued focus on reducing import dependence in defense equipment.

Reasons

• Rising global tensions may drive higher allocations toward indigenous defense manufacturing. 

Conclusion

Since the previous budgets have focused on providing more relief and encourage economic participation, the upcoming budget is primarily expected to focus on economic stability.

Related Articles:
1. Budget 2026 – Date, Time, When and Where to Watch Live?
2. Budget 2026 Expectations on Income Tax
3. Budget 2026 Highlights
4. Economic Survey 2026