Higher exemptions, wider slabs: Why Budget 2026 could put more money in your pocket

As India prepares for the Union Budget, salaried individuals and middle-class taxpayers are hoping for relief measures to ease financial stress and boost disposable incomes. With direct and indirect tax collections at robust levels, expectations are high for reforms that balance relief with growth.

From reducing ambiguity to revising income tax slabs, this year’s Budget is seen as a critical opportunity to put more money in people’s hands while driving consumption and economic momentum. Here are certain key expectations and recommendations:

Taxation for mobile employees

India has a good pool of mobile employees, both outbound as well as inbound. The Income Tax Act, 2025 does not have any specific provisions on taxation of mobile employees, which has led to frequent litigation and reliance on judicial precedents for tax positions to be adopted. There are some provisions where clarifications are required.

• The Act could have provisions dealing with taxability of mobile employees on aspects such as taxability of equity awards and when their service during the vesting period falls under two or more tax jurisdictions.
• Further, to enable the claim for foreign tax credit at the tax withholding stage, there should be express provisions, and necessary changes in the quarterly e-TDS statements.

Also read | Why more taxpayers are ditching the old tax regime—and what Budget 2026 could change

Double taxation on retiral contribution

In case the employer contribution to retirals is more than the prescribed limit of Rs.7.5 lakh per annum, the excess and the accretions thereon are taxable in the hands of the employee. The said contributions, when withdrawn, would be subject to withholding tax if the conditions for exemption (e.g. 5 years of continuous service in case of provident fund) are not complied with. In the absence of any specific exemption provided for excluding the income already taxed in earlier years, there could be double taxation at the withdrawal stage. It is recommended that a provision be inserted to provide relief from double taxation in such cases.

Tax slabs and deductions

The current income tax rates under the old tax regime are stagnant since tax year 2017-18. These tax slabs must be revisited to give adequate relief to taxpayers on account of inflation.

Special incentives/benefits for women

Women empowerment has been at the forefront of the government’s initiatives to promote equal participation in the workforce. To support this initiative, incentives may be provided in the form of tax exemptions on incomes earned by women employees who join the workforce after a career break. Women entrepreneurship could be encouraged by providing lower tax rates for start-ups as well as for businesses commenced and run by women.

Loss from house property

The current deduction limit of Rs.2 lakh for interest on home loans has remained unchanged for years, despite soaring property values and interest rates. It is recommended to allow deduction for interest paid on house property to be raised to Rs.5 lakh from the existing limit.

Further, allowing such loss to be set off against any other head of income in the current tax year as well as subsequent tax years with the aforementioned higher limit could make home ownership more attractive.

In a nutshell, the upcoming Budget is expected to focus on putting more money in people’s hands through higher exemptions, expanded deductions, and parity across tax regimes. These measures could ease financial stress, boost consumption, and support India’s growth momentum.

The Author is Partner, Deloitte India