Budget 2026: Experts Seek Higher Standard Deduction for Salaried Employees

Ahead of the Union Budget speech on February 1, 2026, many tax experts and industry groups have asked the government to raise the standard deduction available to salaried employees under Section 19 of the Income Tax Act, 2025.

A standard deduction is a fixed amount that salaried employees can subtract from their salary before tax is calculated, without needing to show any bills or proofs.

Under the current Income Tax Act, 1961, this benefit is given under Section 16. In the new Income Tax Act, 2025, the same benefit will continue but will be covered under Section 19, and the new law will apply from 1st April 2026.

Right now, if you choose the new tax regime, you can claim a standard deduction of up to Rs 75,000, while under the old tax regime, the deduction is limited to Rs 50,000. This simply helps reduce your taxable income and lowers the tax you have to pay.

Many people want the government to raise the standard deduction under both tax systems. Experts believe this would help employees because everyday expenses and work-related costs are going up, making it difficult for people to manage their money.

Experts said in their Pre-Budget Memorandum 2026 that “Consider enhancing the standard deduction u/s 16 of ITA 1961 (Section 19 of ITA 2025) from Rs 75,000 to Rs 150,000 or more to help salaried employees with inflation and increased costs of living.” Earlier, tax experts had suggested increasing the standard deduction to Rs 1 lakh in Budget 2026.

KPMG said in its key expectations from the Union Budget 2026-27 that the government might increase the standard deduction to Rs 1 lakh in the 2026 Budget.

Right now, salaried employees can deduct Rs 50,000 from their income under the old tax system and Rs 75,000 under the new one before paying tax.

If this increase happens, a larger part of your salary won’t be taxed, which means you’ll pay less tax and take home more money. The idea is to help people cope with higher prices and everyday expenses due to inflation.

On the other hand, ICAI is suggesting that married couples should be allowed to file their taxes together under a joint taxation system. Even if they file jointly, both the husband and the wife should still get their own separate standard deduction on their salary income as long as they are both salaried.