Let’s be honest—filing your taxes shouldn’t feel like running an obstacle course blindfolded. Yet for millions of salaried Indians, that’s exactly what it’s become. With rising costs of living, stagnant wage growth, and complex tax rules, the middle class is stretched thin. Now, as Budget 2026 looms on the horizon, all eyes are on Finance Minister Nirmala Sitharaman. Will she finally offer real, tangible relief to the backbone of India’s economy—the salaried taxpayer?
The stakes are high. Under the current new tax regime, individuals earning up to ₹12 lakh pay zero tax thanks to a rebate under Section 87A. Add the ₹75,000 standard deduction, and that effective tax-free threshold jumps to ₹12.75 lakh in gross income. But is that enough in 2026? Experts and citizens alike say: not even close.
Table of Contents
- Why the Middle Class Is Feeling the Pinch
- Budget 2026 Income Tax: Top Demands from Salaried Employees
- The Standard Deduction Debate
- New vs. Old Tax Regime: Which One Needs Fixing?
- What Households Really Want
- Conclusion: Will Budget 2026 Deliver?
- Sources
Why the Middle Class Is Feeling the Pinch
Inflation hasn’t been kind. Groceries, fuel, education, healthcare—everything costs more. Yet salary hikes have barely kept pace. According to data from the Reserve Bank of India, average household savings rates have declined over the past two years, signaling financial stress [[1]].
Meanwhile, the government has aggressively pushed the new tax regime, which offers lower rates but strips away most deductions. While it simplifies filing, it often ends up costing more for those with home loans, health insurance, or children in school. For many, the “simpler” system feels like a trap—not a benefit.
Budget 2026 income tax: Top Demands from Salaried Employees
So what are salaried taxpayers actually asking for? It’s not about handouts—it’s about fairness and recognition of their economic reality. Here are the top five expectations:
- Raise the Section 87A rebate limit: Increase the tax-free threshold from ₹12 lakh to at least ₹15 lakh under the new regime.
- Expand the standard deduction: Raise the ₹75,000 standard deduction to ₹1 lakh to account for rising professional expenses.
- Allow key deductions in the new regime: Permit HRA, LTA, and Section 80C benefits (like PPF, ELSS) even under the new tax structure.
- Index tax slabs to inflation: Automatically adjust income brackets yearly to prevent “bracket creep.”
- Reduce TDS burden: Simplify TDS rules so employees aren’t forced into unnecessary refund cycles.
These aren’t radical ideas—they’re practical adjustments that would restore balance without blowing a hole in the fiscal deficit.
The Standard Deduction Debate
The ₹75,000 standard deduction—reintroduced in Budget 2023—is a lifeline. It acknowledges that salaried folks incur unavoidable work-related costs: internet, mobile, office attire, even commuting. But in 2026, ₹75,000 doesn’t go far.
Industry bodies like the All India Federation of Tax Practitioners (AIFTP) have consistently lobbied for an increase to ₹1 lakh [[2]]. Given that average urban monthly expenses for professionals now exceed ₹25,000, this ask is more than reasonable. A higher standard deduction would also reduce compliance burden—fewer receipts to track, fewer forms to file.
New vs. Old Tax Regime: Which One Needs Fixing?
The government claims the new regime is “simpler,” and by numbers alone, it is. But simplicity shouldn’t come at the cost of equity. The old regime, with its deductions for home loans (Section 24), health insurance (80D), and education (80E), better reflects real-life financial responsibilities.
Instead of forcing a binary choice, experts suggest a hybrid model. Imagine being able to claim HRA and a basic 80C deduction while still enjoying lower slab rates. That’s the kind of innovation salaried households are hoping for in Budget 2026 income tax planning.
For more on smart tax-saving strategies, see our guide on [INTERNAL_LINK:maximize-80c-deductions].
What Households Really Want
Beyond technical tweaks, there’s a deeper emotional plea: see us. The salaried class isn’t asking for luxury—they’re asking for breathing room. They want to save for their kids’ education, build an emergency fund, or maybe even take a modest vacation without guilt.
Targeted relief at the lower end of the income spectrum—say, for those earning between ₹7–15 lakh—is where the real impact would be felt. These are the teachers, nurses, engineers, and mid-level managers who keep the economy humming. A small tax break for them translates into big boosts in consumer confidence and domestic demand.
As the Economic Survey 2025 noted, “Strengthening household balance sheets is critical for sustainable growth” [[3]]. Tax policy is a direct lever to achieve that.
Conclusion: Will Budget 2026 Deliver?
All signs point to a cautious but responsive approach from the Finance Ministry. With general elections in mind and economic growth needing a consumption boost, delivering middle-class tax relief isn’t just compassionate—it’s strategic.
While we won’t know the final verdict until February 1, 2026, one thing is clear: the expectations are louder, clearer, and more urgent than ever. If FM Sitharaman wants to earn the trust of India’s working families, Budget 2026 income tax reforms must move beyond optics and into real, lasting relief.