Budget 2026 is expected to introduce major reforms including a GST-like overhaul of Customs Duty, simplified TDS rules and potential increases in standard deduction. Multiple sectors, including defence, MSMEs and critical minerals, may see special allocations.
As Finance Minister Nirmala Sitharaman is set to present her ninth consecutive Union Budget on 1 February, expectations are high that the government will introduce a significant revamp of the customs duty structure, similar to the Goods and Services Tax (GST) model. In the backdrop of global geopolitical uncertainty, the focus is likely to remain on boosting economic momentum while strengthening India’s fiscal position. Officials indicate that the Budget may also prioritise lowering the debt-to-GDP ratio, signalling a shift towards reducing the overall debt burden rather than only managing deficits.
Higher standard deduction expected for individual taxpayers
After last year’s relief, which raised the income tax exemption to Rs 12 lakh and was followed by cuts in various GST slabs, taxpayers are hoping for another increase in the standard deduction. Industry bodies are also expecting clearer rules under the simplified Income Tax Act 2025, which is set to come into effect from 1 April. The government may introduce additional incentives to make the new tax regime more appealing so that more taxpayers opt out of the old structure.
Government likely to simplify TDS structure
There is a strong possibility that the government will reduce and simplify the large number of TDS categories and rate slabs. The Budget is also likely to propose lower customs rates and easier procedures as part of trade facilitation reforms. A dispute resolution scheme may also be introduced to settle nearly Rs 1.53 lakh crore stuck in various litigations. With global tensions continuing, the defence budget is expected to receive a notable increase. For rural India, a new scheme under the “Viksit Bharat – Employment and Livelihood Mission” may be launched with joint participation from the Centre and states.
Multiple sectors could get major relief
Government employees are hopeful that the 8th Pay Commission may be announced, which could be implemented from January 1, 2026. States may also receive a larger share of taxes based on the recommendations of the 16th Finance Commission. The Budget may offer special incentives for MSMEs and industries such as gems and jewellery, leather and footwear. Additional funding may be allocated for the exploration and processing of critical minerals, including lithium and cobalt, in line with India’s strategic needs.
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