Budget 2026: Tax relief for salaried class, customs duty tweaks likely as govt balances growth and fiscal discipline

As the Union Budget 2026 approaches, expectations are building around direct tax relief for the salaried class and targeted rationalisation of import and customs duties, with experts saying the government is likely to strike a balance between fiscal consolidation and growth support. 

Tax and policy specialists said the Budget could deliver meaningful relief to individuals, particularly salaried taxpayers while using calibrated tariff changes to strengthen domestic manufacturing and address long-standing duty distortions. 

On the indirect tax front, Krishan Arora, Partner – Indirect Tax at Grant Thornton Bharat, said the government is expected to maintain a measured approach to customs duties, with a sharper focus on sectors affected by inverted duty structures, such as textiles. 

Measured approach to customs duties

“Rate realignments may be selectively used to promote value-added domestic manufacturing. Sectors like footwear and certain electronics could see phased manufacturing programmes to boost localisation,” he said. He added that further pruning of exemptions and a possible reduction in the number of tariff slabs—along the lines of GST 2.0—could help narrow the gap between headline tariff rates and actual duties paid. 

Wider income tax slabs

For individual taxpayers, experts expect personal income tax reforms to be a key highlight. Akhil Chandna, Partner and Global People Solutions Leader at Grant Thornton Bharat, said Budget 2026 is likely to focus on taxpayer-friendly measures, including wider tax slabs, a higher basic exemption limit, and moderation in surcharge rates. Under the new tax regime, increasing the standard deduction to around ₹1.25 lakh and allowing select deductions such as health insurance, home loan interest, and life insurance could make the regime more attractive, he said. Raising the advance tax threshold to ₹50,000 from ₹10,000 could also ease compliance for small taxpayers. 

Increase in standard deduction

Echoing similar views, Sumeet Hemkar, Partner at Deloitte India, said rising inflation and higher commodity prices have put pressure on household finances, intensifying demands for direct tax relief. “An increase in the standard deduction is the most talked-about expectation,” he said, adding that there is a strong case for raising it to at least ₹1 lakh, with further increases over time to reflect inflation-linked living costs. He also flagged growing expectations for extending health insurance deductions to those opting for the new tax regime. 

From a customs and sectoral perspective, Punita Bhuchar Rana, Partner at Deloitte India, said duty rationalisation is expected to focus on energy, metals and healthcare, where India remains structurally import-dependent. She said exempting LNG from customs duty could lower energy costs and support the clean energy transition while revisiting surcharge structures on fuel imports could reduce inflationary pressures. Correcting inverted duties in metals such as aluminium and steel would also improve competitiveness, she added. 

New tax regime

Legal experts said the steady migration to the new tax regime could prompt a structural shift. Rahul Charkha, Partner at Economic Laws Practice, noted that over 75% of individual taxpayers have already moved to the new regime, raising expectations that the old regime could be gradually phased out. He said the standard deduction under the new regime could rise to ₹1–1.5 lakh while the income threshold for the 30% tax slab may be increased to better align with rising income levels. Extending deductions for health insurance, persons with disabilities and raising surcharge thresholds are also widely anticipated, he said. 

Rationalisation of customs duty

On the trade side, Anurag Sehgal, Principal at Price Waterhouse & Co LLP, said the government is likely to continue supporting domestic manufacturing through customs duty rationalisation on key raw materials and intermediates, coupled with a tighter review of exemptions aligned to Make in India sectors such as electronics, renewables and electric vehicles. He said trade facilitation measures and a long-awaited customs amnesty scheme could feature in the Budget to resolve legacy disputes. 

Overall, experts said Budget 2026 is shaping up as a critical exercise in easing the tax burden on individuals, correcting tariff distortions and supporting manufacturing competitiveness—while staying aligned with the government’s broader fiscal and growth objectives.