After a lot of speculation, the Union Budget is set for February 1, 2026, a Sunday. It will be the first time the Budget is presented on a Sunday since 2000.
This is one of those moments when TVs stay on for a couple of hours, and everyone leans in to see what the Union Budget will bring. Because no matter how many times we say “no big expectations,” the Budget always gives us something to hope for.
Budget 2026, though, comes at a slightly different juncture. The Income Tax Act, 2025, is set to be implemented from April 1, 2026, so the overall structure of income tax is largely settled. Big changes aren’t really the focus this time.
What people are really watching for are small, sensible changes - ones that make compliance less painful, improve reporting, and bring thresholds more in line with current economic reality.
Here’s what we think Budget 2026 should focus on.
1. Increase in the LTCG exemption limit
Long-term capital gains taxation has become a growing concern for retail investors. With more people investing in equities and mutual funds, many small investors now fall into the tax net simply because asset values have appreciated over time, not because their income has meaningfully increased.
At present, the LTCG exemption is just ₹1.25 lakh. Honestly, that’s low for anyone who’s been investing steadily in the equity markets. Increasing the exemption limit would benefit retail investors and, simultaneously, support long-term foreign investment in Indian markets.
2. Extending TDS to under-reported sectors
Over the years, TDS has increasingly been used to collect data and improve compliance, rather than just collecting tax. In fact, it has helped in improving visibility over income that would otherwise remain unreported.
Even today, certain high-volume activities generate substantial income but remain under-reported simply because there is no clear, independent reporting framework. Two such areas stand out.
A) TDS on F&O trading
F&O trading is often cited in this context. While stock exchanges and brokers capture transaction-level data, this information does not translate into a clear picture of actual taxable profits or losses. The final tax outcome still depends entirely on self-reporting by taxpayers.
Budget 2026 could consider introducing TDS in such information-light areas, not to increase the tax burden, but to bring consistency in disclosures and widen the tax base. We’ve already seen this approach work with crypto, online gaming, and high-value transactions in the past.
B) TDS on gold and silver
Gold and silver continue to be preferred investment assets for many households. However, when these assets are sold or exchanged, there is often a widespread assumption that capital gains tax does not apply. In reality, capital gains are taxable based on the holding period, just like other assets.
While PAN is mandatory for higher-value transactions, and capital gains apply depending on the holding period, physical gold and silver still lack structured reporting. Introducing TDS at the time of sale could improve disclosures and bring these assets closer to how other mainstream investments are tracked, especially as digital gold, gold ETFs, and similar products become more common.
3. Applying Section 54 relief to other investments
Section 54 gives investors relief from long-term capital gains tax when the gain from selling a residential house is reinvested in buying or building another residential property.
Budget 2026 could take the same principle of ‘getting tax relief when gains are reinvested’ and apply it to other sectors. This could include commercial property, long-term equity or debt investments, startups, or even green projects. If the idea is to reward reinvesting gains, it shouldn’t matter whether the money goes into a house, a business, or a long-term investment.
A tweak like this would make long-term investing simpler, reduce the paperwork hassle, and encourage people to put money into assets that build wealth over time.
4. Higher limits for presumptive taxation and tax audit
Many small businesses and professionals have grown steadily over the years. Digital payments are now very common, and billing sizes are much higher than when these limits were first set. So, we think the presumptive taxation and tax audit limits should keep pace with this growth.
Currently, presumptive taxation applies to small businesses with a turnover of up to ₹2–3 crore and for professionals under Section 44ADA, the limit is up to ₹50 lakh–₹75 lakh. The tax audit threshold stands at ₹1 crore, which is extended to ₹10 crore only if 95% of both your receipts and payments are done digitally.
Crossing these numbers today doesn’t just mean a business is large. It often reflects inflation, higher billing rates, or increased transaction volumes. This year’s budget is a chance to revise these thresholds, ease compliance, reduce unnecessary audits, and let businesses focus on growth instead of paperwork.
5. Phasing out the old regime
This is something we’ve been watching closely. Over the last few budgets, the policy direction has clearly favoured the new tax regime. With lower tax rates, higher rebates, and simplified structures, especially for salaried individuals, there’s little reason to stick with the old regime. Though it still exists, after the Income Tax Act, 2025, it’ll increasingly become redundant.
Budget 2026 could signal a decisive move toward a single, simplified regime. Making the old regime less attractive would reduce confusion between the old and new regimes, simplify compliance, and rationalise tax planning for most taxpayers.
Budget expectations are ultimately reflections of ground reality. So, what do you think of Budget 2026?