Budget 2026 reforms are under sharp focus as banks, taxpayers, and insurers seek relief on savings, taxation, and compliance burdens. As we prepare for the Union Budget 2026, we are seeing increased expectations from Banks, Tax Payers & Financial Institutions. The Government is under increasing pressure to stimulate Household Savings and to reduce the compliance burden on taxpayers. This is confirmed by the State Bank of India’s published report before the Union Budget regarding falling bank deposits within the financial savings of households in India, where deposits have gone down from 38.7% in FY24 to 35.2% for FY25. Banks are now looking for increased tax equality so as to attract back those households that will invest in fixed-income instruments.
State Bank of India (SBI) has requested that the Government align the taxes on deposit interest with the capital gains rate. In addition to reducing the tax burden, State Bank of India has asked for a reduced period of the lock-in for tax-saving fixed deposits to match that of the Equity Linked Savings Scheme (ELSS) of 3 years.
State Bank of India has proposed the removal of Tax Deducted at Source (TDS) on savings account interest or an increased exemption limit. This will increase liquidity and strengthen household balance sheets.
Income tax relief tops middle-class wishlist in Budget 2026 reforms
Taxpayers do not anticipate any substantial adjustments to tax slabs in Budget 2026. Experts are advocating for an increase in the standard deduction from ₹75,000 to ₹1 lakh, and an increase in long-term capital gains exemption to ₹2 lakh due to increasing medical inflation. 80D benefits for professionals should be allowed under the new tax structure, and Section 80D deductions should be expanded. Senior Citizens would like additional relief on both interest income and health costs.
Experts have recommended that the ITR-U rules for voluntary compliance be loosened and that taxpayers be allowed to file their ITR-U during tax proceedings. The industry has asked for a rationalisation of surcharges, which would lower effective tax rates for taxpayers. Most advisers are expecting to maintain current conditions with a greater emphasis on efficient administration.
Insurance, GST, and Long-Term Stability
According to SBI, declining insurance penetration is a significant issue regarding its policy formulation; they indicate that the percentage of insurance penetration decreased from 3.7% in FY25 (IRDAI) to a recent figure.
Health Insurance reforms are the primary expectation of Insurers. Additionally, Banks would like further clarification on GST Input Service Distributor guidance, and request specifically worded statutes to decrease litigation.SBI advocates for the Removal of Bank Services from GST TDS.
Interest groups believe the implementation of these Reforms would restore consumer confidence and connection to Formalised Finance. Therefore, Budget 2026 is anticipated to prioritise Convenience, Compliance, and Security in Savings. The Government is now focused on balancing Fiscal Discipline and Financial Capability of Revenues from Households.
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