Income tax slabs and rates for FY 2026-27 remain untouched. The standard deduction stays frozen at 275,000, a figure increasingly misaligned with the realities of middle-class life. In urban India, housing, education, healthcare and commuting now absorb a far larger share of income than this deduction acknowledges.
Budget 2026 chooses to ignore ‘Tax policy continues to favour enterprise over earnings. Businesses deduct rent, interest, depreciation and employee costs before tax, while salaried incomes are taxed without recognising the unavoidable costs of living. Budget 2026 entrenches this imbalance by reaffirming a low-rate, low-deduction structure where relief is treated as a concession rather than a right.
Expectations of a higher rebate threshold were set aside. What remains is an incremental adjustment without structural intent. The budget also ignores the citizen's life cycle. The middle classis paying for children’s education, supporting ageing parents, and self-funding retirement in a country with limited social security, rising healthcare costs, and a broken health insurance regime. By offering no recognition of these pressures, the tax system assumes infinite resilience from the middle class, evenasits financial margin steadily narrows. This is the same vote bank that pays taxes (and on time), followed rules, absorbs shocks, and rarely features in fiscal populism.
Middle-class strain is no longer anecdotal. RBI consumer confidence surveys record sustained anxiety around rising prices, job security and shrinking household spending capacity. White-collar professionals, especially across services and technology, face prolonged uncertainty and income volatility. Yet Budget 2026 locks in outdated tax parameters, offering no response to pressures the central bank itself has repeatedly flagged.
Against this backdrop, the relief announced if narrow and selective, TCS on overseas tour packages and on remittances for education and medical purposes has been reduced to 2 percent, easing cash flow at the margins for a limited set of households. The reversion of share buyback taxation to capital gains is a welcome correction for retail investors. These measures address specific frictions, but they sit far from the everyday pressures shaping middle-class finances.
A government long perceived as middle-class friendly has, in this budget, offered continuity without comfort and left that constituency fiscally dry. Has the middle class been left in a lurch? If inflation rises again, the middle class may have to drop even its lunch.
The budget has promised simpler income tax forms to ease compliance for the common Indian. If simplification was always possible, why was it delayed for so many years under the same administration? Streamlining procedures and decriminalising minor offences are not reforms but belated repairs, correcting frictions that should have been resolved long ago.
The larger fiscal direction is unmistakable. With limited room for manoeuvre, Budget 2026 prioritises capital expenditure and long-term infrastructure—choices that are defensible in a constrained fiscal environment. But this strategy still rests on a stable and compliant funding base, and that base is the salaried middle class. It pays predictably, moderates consumption, and absorbs policy continuity without protest.
India’s growth story rests on middle-class consumption. When disposable incomes are steadily compressed, the impact surfaces as weaker discretionary demand, softer services growth, and a consumption base that thins even as headline numbers hold. When fiscal relief and upward socio-economic mobility remain elusive, the middle class could begin to disengage from the political economy that relies on it.
The question is whether the middle class remains politically orphaned—too large to ignore in rhetoric, too diffuse to defend in policy. Budget 2026 reflects a political economy where the middle class is essential to the system and narrative, but peripheral to its priorities. In doing so, it leaves India’s most compliant citizens exactly where policy finds them most convenient: waiting, in the middle.
