Step 1: Set up the initial ratio of Savings and Expenditure

Let Swarna's savings be $S = 100$. Since her expenditure is $125\%$ more than her savings, expenditure $E = 100 + 125 = 225$.

$E = 225, \quad S = 100$

Step 2: Calculate initial Income

Income $I$ is the sum of Expenditure and Savings: $I = E + S = 225 + 100 = 325$.

$I = 225 + 100 = 325$

Step 3: Calculate the changes in Expenditure and Savings

Expenditure decreases by $6\%$: $\Delta E = -6\% \text{ of } 225 = -0.06 \times 225 = -13.5$. Savings increases by $26.5\%$: $\Delta S = +26.5\% \text{ of } 100 = +26.5$.

$\Delta E = -13.5, \quad \Delta S = +26.5$

Step 4: Calculate net change in Income and percentage increase

Net increase in Income $\Delta I = \Delta E + \Delta S = -13.5 + 26.5 = +13$. Percentage increase in income = $(\frac{13}{325}) \times 100 = 4\%$.

$\text{Percentage Increase} = \frac{13}{325} \times 100 = 4\%$