The upcoming Union Budget, to be presented by Finance Minister Nirmala Sitharaman on 1 February 2026, may bring some relief for the middle class. Reports suggest that the standard deduction for salaried and pensioners could be increased from the current limit to ₹1.25 lakh.
The standard deduction is a fixed amount directly subtracted from gross income, reducing the taxable income and, in turn, the tax liability. Currently, under the old tax regime, the standard deduction stands at ₹50,000, while the new tax regime raised it to ₹75,000 in 2024. With the government encouraging more taxpayers to adopt the new tax system, any increase in standard deduction is expected to apply primarily there.
Experts are advocating for the hike. Manas Chugh, Director at Osgan Consultants Pvt. Ltd., suggests that the deduction in the new regime should be increased from ₹75,000 to ₹1 lakh. Senior lawyer Nupur Maharaj also recommends raising it to ₹1 lakh to provide meaningful relief to the middle class.
Under the new tax regime, last year, incomes up to ₹12 lakh were tax-free. With the current standard deduction of ₹75,000, salaried individuals effectively enjoy a tax-free income of ₹12.75 lakh. Increasing the standard deduction further would enhance the benefits, making the new tax regime more attractive and easier to adopt.
Many experts also suggest linking the standard deduction to inflation so that it automatically adjusts with rising living costs, providing sustained relief to taxpayers over time.
Discover more from SD NEWS agency
Subscribe to get the latest posts sent to your email.