Income Tax Budget 2026: Finance Minister Nirmala Sitharaman announced a new income tax regime in the Union Budget 2020. Since then, she has been trying to make it attractive. In the last Union Budget, she made income up to ₹12 lakh per annum tax-free under the new regime.
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The government announced the new income tax regime in the Union Budget 2020. Since then, the government has focused on making this regime attractive. This has shown benefits. Individual taxpayers have shown increased interest in the new regime. Experts say that if the Finance Minister announces some major measures, the new regime could further increase the appeal of taxpayers.
1. Increase in standard deduction
Currently, the standard deduction under the new income tax regime is ₹75,000. The American Chambers of Commerce in India (AMCHAM) has recommended the government increase it to ₹150,000. The standard deduction is only available to employed individuals. This reduces employees’ tax liability. They do not need to make any investment to claim this benefit.
2. Deduction on health insurance
Currently, deductions on health insurance premiums are available only under the old Income Tax regime. Tax experts say that medical expenses are rising rapidly, making health insurance essential for every family. If the government allows deductions on health insurance premiums under the new regime as well, it will be of great benefit to the public.
3. Deduction on term life insurance
The government may also allow deductions for term life insurance under the new income tax regime. Term life insurance does not have a savings component; it only provides protection. If something unfortunate happens to the policyholder, the nominee receives the insurance money from the insurance company. This is essential for the security of middle-class families.
4. Deduction on home loan interest
Currently, home loan interest is eligible for deduction under the old income tax regime. Under Section 24B, interest up to Rs 2 lakh per financial year can be claimed as a deduction. Many people are interested in purchasing a home using a home loan to avail this tax benefit. Taxpayers under the new income tax regime should also be eligible for this tax benefit.
5. Increase the income limit for surcharge
Currently, under the new tax regime, a surcharge is levied on taxpayers with incomes exceeding ₹50 lakh. The rate varies from 10% to 25%, depending on the income. Experts recommend raising the surcharge limit above ₹50 lakh. This could be increased to at least ₹75 lakh in the Union Budget .
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