Union Budget: All eyes are fixed on February 1, 2026, when Finance Minister Nirmala Sitharaman will present her ninth consecutive budget in the Lok Sabha. Coming amid global geopolitical turmoil, this budget is expected to provide a new direction for the Indian economy. It is being speculated that this time the government’s focus will not only be on reducing the fiscal deficit but also on improving the debt-to-GDP ratio.
An increase in the standard deduction for salaried individuals and special concessions for the MSME sector are expected. Furthermore, the announcement of the 8th Pay Commission for government employees could be the biggest highlight of this budget. Let’s explore in detail what Budget 2026 may hold for the common man and the industry.
Income Tax and the New Tax Act 2025
After last year’s tax relief on incomes up to ₹12 lakh, expectations are sky-high among individual taxpayers. This time, the government may provide significant relief to the middle class by further increasing the standard deduction limit.
The most significant change is the new Income Tax Act 2025, which will come into effect on April 1, 2026. Clear guidelines for simplifying this law may be issued in the budget. The government aims to attract more people to the ‘new tax regime’, for which some new incentives may be announced. Additionally, a proposal to reduce the complex TDS categories and lower their rates may also be introduced.
Masterplan for Customs Reform and Amnesty Scheme
To facilitate trade, the Finance Minister may introduce a major GST-like change in the customs duty structure. This aims to remove the anomalies in import and export duties. The industry is hopeful that the government will introduce an amnesty scheme to resolve disputed tax cases worth approximately ₹1.53 lakh crore.
In addition, special concessions may be announced for employment-generating sectors such as gems and jewelry, leather, and MSMEs. In view of future technologies, separate funding may also be allocated in the budget for the mining and processing of critical minerals such as lithium and cobalt.
8th Pay Commission
This budget could be a historic one for central government employees and pensioners. The Finance Minister is expected to officially announce the formation of the 8th Pay Commission. If implemented from January 1, 2026, millions of employees will see a significant increase in their salaries and fitment factors.
Also, based on the recommendations of the 16th Finance Commission, the state’s share of taxes may also be increased, providing it with more funds for infrastructure development.
Special Focus on Rural Development and the Defence Sector
Budget 2026 may launch the “Developed India – Employment and Livelihood Mission” to transform rural India. This will be a new, centrally and state-sponsored scheme that will provide skill training and employment opportunities to rural youth.
Given the ongoing tensions on global borders, a significant increase in the defence budget is also expected. The government’s focus will be on indigenous defence equipment manufacturing and research (R&D) under the “Atmanirbhar Bharat” initiative.