Budget 2026: Expectations For New Tax Slabs And Deduction Limits As Govt Eyes Joint Income Tax for Couples

Individual taxpayers and the middle class have high expectations for additional support as the Finance Minister gets ready to introduce the Union Budget 2026 on February 1. The 2026 announcements are anticipated to concentrate on further streamlining the tax structure and bringing it into line with the growing cost of living, following the major changes in Budget 2025 that raised the tax-free ceiling under the new regime to Rs 12 lakh.

The comprehensive restructuring of India's personal income-tax framework in 2025, pursuant to which net total income up to Rs.12 lakhs has become effectively non-taxable. As a result, a substantial segment of middle-income taxpayers has moved outside the ambit of the tax net.

In this backdrop, the expected tax policy in future is likely to shift away from mere rate rationalisation towards deeper structural reforms that acknowledge the household as a distinct economic unit. In this context, and in anticipation of the Union Budget 2026, the proposal to introduce a system of joint income-tax filing for married couples is gaining attention as a reform with strong potential.

The Section 80C limit remaining at Rs 1.5 lakh for more than ten years is a major source of dissatisfaction for individuals who continue to follow the Old Tax Regime. It is widely anticipated that this cap would be increased to Rs 2.5 lakh. A change of Section 80D limitations for health insurance premiums, which are now restricted at Rs 25,000 for residents and Rs 50,000 for senior citizens, is also widely expected to enable families to obtain better medical coverage in light of escalating healthcare prices.

The real estate industry and homebuyers are looking for a rise in the Section 24(b) deduction for home loan interest as a result of the government's ongoing effort for "Housing for All." A much-needed buffer against high interest rates will be provided by raising this cap from Rs 2 lakh to Rs 3 lakh or higher.

"At present, the Income-tax Act, 1961 enables an assessee to exercise an option between taxation under the default regime set out in section 115BAC and taxation under the old tax regime. Under both regimes, the basic exemption limit in case of individuals is Rs. 2.5 lakh under the old regime, and Rs. 4 lakhs from FY 2025-26 onwards under the default regime without any reference to the assessee's marital status or household composition. Consequently, while households comprising multiple earning members are able to independently avail and fully utilise such exemption thresholds, families sustained by a sole or principal earning spouse often experience a mismatch between the individual-based exemption provisions and the fiscal realities of household cost-of-living obligations," said CA (Dr.) Suresh Surana.

"In order to mitigate this structural inequity, it is expected that an optional joint taxation mechanism for married couples may be contemplated, whereby spouses could elect to file a consolidated return of income. Such a framework could provide for a higher, family-level basic exemption limit, thereby effectively aggregating individual thresholds and affording proportionate relief to single-income households. This approach would factor the economic interdependence inherent in marital households and align the tax base more closely with actual household consumption and financial obligations," CA (Dr.) Suresh Surana added.

"Under a joint filing regime, it is conceivable that certain personal reliefs, including the standard deduction under section 16(ia), may continue to be applied on a spouse-specific basis in the case of salaried taxpayers, notwithstanding the filing of a combined return," CA (Dr.) Suresh Surana stated.

From a policy standpoint, joint taxation would serve to rationalise the tax burden borne by families where income accrues predominantly to one spouse, promote equity among similarly placed households, and enhance the administrative efficiency of the tax system.

Comparable joint filing provisions exist in several developed tax jurisdictions, including USA and UK, where tax laws recognise spousal income pooling and shared familial responsibilities. Adoption of a similar taxation structure in India would represent a convergence with international best practices and support long-term household financial stability.