Union Budget 2026: Top Expectations Every Indian Should Watch Out For

The briefcase (or the digital tablet) is coming out soon. As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026, the air is thick with anticipation. From the salaried middle class to the booming startup ecosystem, everyone has a wishlist.

A Sunday where citizens and investors are looking for a balance between fiscal discipline and relief from the rising cost of living.

The Union Budget 2026, scheduled for presentation on February 1, 2026, is being viewed as a pivotal roadmap for Viksit Bharat 2047 (Developed India by 2047). The overarching theme is shifting from "survival and recovery" to "long-term structural transformation."

Here are the top expectations that could change the way you manage your Paisa this year:

Revision of Income Tax Slabs/ Personal Income Tax & The "Middle Class" Push

The biggest question every year: Will I save more tax? Within the new tax regime, there is a strong expectation for an increase in the standard deduction limit and a potential rejig of the 5% and 10% tax brackets to provide relief against inflation.

Following the major overhaul in Budget 2025, the focus this year is on "fine-tuning" the New Tax Regime to boost urban consumption.

• Standard Deduction Hike: There is a strong expectation that the standard deduction for salaried individuals will be raised from ₹75,000 to ₹1,00,000.  This is a simple way to give everyone a small, immediate "raise" without changing the entire tax code again. 

  
  

• 8th Pay Commission Factor: With the 8th Pay Commission likely to roll out in 2026, experts expect the government to widen tax slabs to prevent "bracket creep" (where salary hikes are eaten up by higher tax rates).  With the new pay commission expected to increase salaries for millions of central government employees in 2026, the government may slightly nudge the slabs to prevent that extra salary from being immediately swallowed by a higher tax bracket (a phenomenon called "bracket creep").

  
  

• Health Insurance Deductions: Many are calling for the New Tax Regime to allow deductions for health insurance premiums (Section 80D), as medical inflation continues to rise.

  
  

[In 2025, the government fundamentally changed the math for most Indian taxpayers. They didn't just tweak a few numbers; they significantly expanded the tax-free limits and restructured the slabs to make the New Tax Regime the clear default choice for the middle class. The tax-free income threshold (via rebates) was raised to ₹12 Lakh. When you add the ₹75,000 standard deduction, anyone earning up to ₹12.75 Lakh essentially pays zero income tax under the New Regime. The income slabs were widened. For example, the 30% tax rate—which used to kick in at ₹15 Lakh—now only applies to income above ₹24 Lakh.]

TDS simplification

For Budget 2026, TDS (Tax Deducted at Source) is expected to be a major focus area.

The focus is moving from how much you pay to how easily you pay it. Tax payers and organisations expect a push to reduce the dozens of different TDS rates into just 2 or 3 standard categories. Simply simplify TDS. 

Currently, there are over 30 different TDS rates (ranging from 0.1% to 30%). Expect a proposal to collapse these into 3 or 4 standard categories (e.g., 2%, 5%, and 10%) to reduce categorization errors and litigation.

Also, there is a strong proposal to eliminate TDS on transactions where GST is already paid. Since GST already provides an invoice-level digital trail, the government doesn't necessarily need a separate TDS deduction to track that same income.

Crypto

Ahead of Budget 2026, the crypto sector is calling for long-awaited regulatory clarity and a reduction in the 1% TDS to help restore investor confidence. 

Read more in full blog here.

Boost for the Startup Ecosystem (The Shark Tank Effect)

The startup ecosystem in India is entering Budget 2026 with a shift in focus. While previous years were about survival and basic recognition, the 2026 expectations are centered on scaling deep-tech, retaining talent through ESOP reforms, and resolving legacy tax disputes.

With India becoming a global startup hub, we expect more "Angel Tax" clarifications and easier compliance for early-stage founders looking for their first round of funding. While Angel Tax was abolished in 2024 (effective from FY 2025-26), the "ghost" of the tax still haunts older startups.

With the launch of the ₹1 Lakh Crore R&D Fund in late 2025, the industry now wants a clear roadmap for how this capital will be deployed.

EV and hardware startups are stuck in a 'tax trap' where they pay 18% GST to buy parts but only collect 5% GST when they sell the finished product. This leaves them with a massive pile of 'extra' tax money sitting with the government that they can't easily use to run their business. A solution to this tax trap is expected.

Green Energy & EV Subsidies

For Budget 2026, the Green Energy and EV sectors are shifting from "initial experiments" to "industrial scale." With India’s 2030 target of 500 GW of non-fossil capacity looming, the government is expected to focus on localization and storage.

The most anticipated announcement for everyday citizens is FAME-III, the successor to the FAME-II scheme (which expired in 2024 and was replaced by the temporary EMPS).

Expected budget allocation is Rs. 10,000 crore.

Digital Rupee (CBDC) Expansion

Expect a roadmap for the wider rollout of the Digital Rupee. With the e-Rupee user base crossing 5 million in late 2025, the government is expected to introduce "merchant-side" incentives like cashbacks and tax credits. 

The Budget is expected to allocate funds for a "Cross-Border CBDC Gateway." This would allow Indians abroad to send money home instantly and at a fraction of the current cost, bypassing the slow and expensive SWIFT network. India is already in advanced talks with several countries (including the UAE and Singapore) to link digital currencies.

Paisa and More (PnM) will be watching if there are incentives for merchants to adopt the digital currency. 

Rural Infrastructure & Agri-Tech

With a focus on "Viksit Bharat," a massive allocation is expected for rural roads and subsidies for startups focusing on drone technology in farming.

The agricultural vision for Viksit Bharat focuses on making India the "food basket of the world" by building a sector that is both high-earning for farmers and tough against climate change. 

To achieve this, the government is focusing on Climate Resilience and Agri-Credit. By introducing high-yielding, weather-resistant seeds, the budget aims to protect crops from unpredictable heatwaves or floods, ensuring food security. 

Simultaneously, by increasing the Kisan Credit Card (KCC) loan limit from ₹3 lakh to ₹5 lakh, the government is providing farmers with more "breathing room" to invest in modern technology and better inputs without falling into debt traps.

Capital Gains Tax Simplification

Investors are hoping for a more streamlined Capital Gains tax structure. Currently, holding periods for stocks, gold, and real estate are all different—simplification here would be a huge win for the stock market.

Mental Health & Healthcare Outlay

Post-pandemic, healthcare remains a priority. We expect a dedicated budget for digital mental health platforms and insurance premium tax breaks.

The target for "Viksit Bharat" is to raise public healthcare spending to 2.5% of GDP (currently it hovers around 1.9%).

Healthcare Infrastructure Fund of ₹50,000 crore is expected to provide low-cost capital for building hospitals in underserved regions. A "sick" workforce is a "slow" economy. A shift from "sick-care" to "wellness."

In the 2025 Budget, direct mental health spending was roughly ₹1,004 crore (about 1% of the total health budget). For 2026, the industry is pushing for expansion of ‘Tele-MANAS’- a helpline,  a possible ₹10,000 tax deduction specifically for preventive health check-ups and diagnostic screenings and more.

The "Peculiar Industry" Push: Space-Tech

Following recent successes, the government might announce a dedicated fund for private players in the Space-Tech sector—one of our favorite PnM Peculiar Industries.

The government's goal is to expand India's space economy from the current $8 billion to $44 billion by 2033.

In Budget25-26, the government allocated about ₹13,416 crore to the Department of Space to fund its missions. For 2026, analysts and industry bodies like ISpA (Indian Space Association) expect allocation of upto ₹15,000 – ₹18,000 crore (a 10% to 20% increase).

This spike is needed to fund "big-ticket" missions reaching critical stages in 2026-27, such as the Gaganyaan (crewed mission) and Chandrayaan-4 (lunar sample return).

Real Estate: Interest Subventions

The current ₹2 lakh deduction on home loan interest, under Sec 24(b) was set in 2014. With rising property prices, there is a strong demand to increase this to ₹5 lakh.

Additionally, the current ₹45 lakh cap for "affordable housing" is outdated for metros. Experts expect this to be raised to ₹75–95 lakh so more buyers can avail of lower GST rates and subsidies.

REITs is a wonderful investment tool. Clearer tax norms and incentives for Real Estate Investment Trusts to allow small investors to participate in high-end commercial real estate with as little as ₹10,000 is required.

Builders want the 100% tax holiday (Sec80-1BA) for affordable housing projects to be reintroduced to make these low-margin projects viable again. 

Education & Skilling 4.0

Expect funding for AI-integrated vocational training. As the "New Professions" category grows, the budget needs to support those learning 21st-century skills.

Gold and precious metals

As gold prices hit historic highs—approaching ₹1.5 lakh per 10 grams domestically and $4,800 per ounce globally in early 2026—the upcoming Union Budget is under intense pressure to manage the fallout.

GST and import duty cut on gold and silver can be a major relief for consumers.

The government suspended new SGB tranches in 2024, but record-high prices have triggered a massive outcry for their return. Reintroduction of SGBs to offer a tax-efficient alternative to physical gold.

ETFs become long-term investments after 1 year. However, physical gold and gold mutual funds turn into long-term investments after 2 years.This un-uniform holding period in the same asset class needs to be looked upon.

---

PnM Takeaway: The 2026 Budget isn't just about numbers; it's about the direction of the new India. Stay tuned to Paisa and More as we break down the fine print on Budget Day!