5 key things to watch out for in Union Budget:Tax reliefs, long-term capital gains and fiscal deficit key areas for the middle-class

Union Finance Minister Nirmala Sitharaman will today, February 1, present the country’s most important financial announcement of the year, Union Budget 2026–27, before both Houses of Parliament. As expected, all eyes will be on Sitharaman’s budget speech, scheduled to begin at 11 am (IST). The address will be delivered in Parliament, covering both the Lok Sabha and the Rajya Sabha, and will also speak directly to the people of the country. The Union Budget is expected to lay out the economic roadmap for India for the financial year 2026–27. 5 key things to watch out for in Budget 2026 Standard Deduction: Budget 2026 has raised expectations of the middle class and salaried employees regarding the possible increase in the standard deduction. Many people are hoping the exemption limit will be raised from the current ₹75,000 to ₹1 lakh under the new tax regime. If this relief is announced by the central government, the total tax-free income could go up to ₹13 lakh, as the amount would attract zero tax after applying the available rebates. Long-term capital gains (LTCG): Taxpayers are seeking a higher exemption limit for long-term capital gains (LTCG) tax and a wider application of the Section 87A rebate under the new tax regime. Earlier, the Association of Mutual Funds in India (AMFI) had asked the Finance Ministry to revise the rules to allow the Section 87A rebate, provided the total income, including capital gains, does not exceed ₹12 lakh. The move aims to offer greater relief to the middle class. At present, the government provides a rebate of up to ₹60,000 under the new tax regime. However, even if a person earns less than ₹12 lakh a year, investing in mutual funds can still attract capital gains tax. Fiscal Deficit: Budget 2026 is expected to place strong emphasis on managing the country’s fiscal deficit. Even though tax collections have been lower than anticipated, the government is confident of staying within its fiscal deficit target for the year. This is likely to be achieved through controlled spending, improved compliance, and higher non-tax revenues, while continuing to support economic growth. “The govt’s commitment to fiscal prudence pathway, on the back of 4.4% deficit target likely to be achieved, is indeed reassuring in the present context as geo-political headwinds and risks would continue to influence economic and fiscal policy in material way,” Reuters quoted Sumit Singhania of Deloitte India as saying. GDP growth: As the Indian economy is expected to grow between 6.8% and 7.2% in FY27, supported by strong macroeconomic fundamentals and ongoing regulatory reforms, concerns remain over the relatively low nominal growth rate. Concerns loom over the nominal growth, which is estimated at around 8%, significantly lower than the 10.1% growth assumed for 2025–26 in the Union Budget. This gap has raised questions about revenue projections and overall fiscal planning. Meanwhile, from the coming month, India will shift to a new GDP base year of 2022–23, replacing the earlier base year of 2011–12. The change is aimed at better capturing structural shifts in the economy, including changes in consumption patterns, technology adoption, and the growing role of new industries. The revised base year is expected to provide a more accurate picture of the country’s economic performance. Divestment: The focus continues to remain on the government’s efforts to divest its assets to the private sector. While the government has increasingly relied on non-tax revenues in recent years, receipts from divestment have consistently fallen short of targets and have often been overlooked, as reported earlier by Mint. This highlights a persistent gap between policy intent and actual execution year after year. Attention is now firmly on the Finance Ministry to see whether it plans to introduce changes or adopt a clearer strategy to revive and accelerate the government’s divestment programme.