Union Budget 2026: Shift expected from tax relief to long-term certainty and growth in focus

The Union Budget 2026 arrives at a pivotal moment for India’s economy. Against the backdrop of global economic volatility, shifting geopolitical alignments and India’s own growth ambitions, the Budget is expected to move the policy narrative beyond incremental relief measures towards long-term certainty, competitiveness and structural clarity.

A key inflection point is the transition to the Income-tax Act, 2025, which will replace the six-decade-old Income-tax Act, 1961 from April 1, 2026. With the new law already enacted, Budget 2026 is widely expected to avoid piecemeal legislative tinkering and instead signal a more principled and cohesive approach to tax policy and administration.

Taxes and tax relief

According to Amit Amlani, Executive Director – Direct Tax at Nexdigm, personal taxation remains a central area of focus. “Easing the burden on individual taxpayers is important in the context of rising living costs,” he said. While recent revisions to tax slabs have provided tangible relief, Amlani believes there is scope to further rationalise slab structures and reassess the maximum marginal tax rate under the new tax regime. Such measures could boost disposable incomes, improve voluntary compliance and support a smoother transition to a simpler, unified tax framework.

Global realignments are also shaping Budget expectations. Ongoing geopolitical tensions and tariff actions led by the US are prompting companies to rethink supply chains. India is well-positioned to benefit from this shift, but stable and predictable tax policies will be critical to attracting investment. “Tax incentives that directly support employment generation should form part of this strategy,” Amlani noted, underscoring the need for a jobs-first approach.

Corporate tax rate

Manufacturing remains a priority area. Industry stakeholders continue to seek the reintroduction of the concessional 15% corporate tax rate for new manufacturing entities to attract fresh investments and strengthen India’s industrial base. In parallel, the rapid expansion of Global Capability Centres (GCCs) has created demand for a national policy framework. While several states have announced GCC-specific incentives, a central framework offering tax certainty, R&D credits, clear transfer pricing rules and safe harbour provisions could significantly enhance India’s attractiveness as a global services hub.

Another area requiring attention is foreign asset disclosure. With enhanced global information-sharing mechanisms now in place, tax authorities have issued notices to individuals over overseas asset reporting. Amlani said Budget 2026 should streamline disclosure requirements, offer clearer guidance and provide safeguards against penalties for genuine, unintentional errors, balancing enforcement with fairness.

Tax slab expansion

Market participants remain cautious about further tax slab expansion in the near term. According to Motilal Oswal’s Budget 2026 Expectations report, the likelihood of widening slabs or enhancing standard deduction limits appears limited, given recent changes and relief through GST rate cuts. However, the report notes that any such move would be positive for capital markets by boosting discretionary spending and investor sentiment.

The Economic Survey 2025–26 reinforces expectations of continuity. It highlights significant income tax relief for the middle class, with individuals earning up to Rs 12 lakh paying no tax, and salaried taxpayers benefiting from an additional Rs 75,000 standard deduction. The Survey also points to improved compliance, with income tax return filings rising from 6.9 crore in FY22 to 9.2 crore in FY25, driven by digitisation and formalisation rather than stricter enforcement.

Overall, Budget 2026 is expected to reinforce a direct tax framework that is simple, predictable and growth-oriented—aligned with India’s employment goals, global competitiveness and long-term economic vision.