Union Budget 2026 pain points: How middle-class India loses out

Budget 2026 has left middle-class taxpayers disappointed, with no changes in income tax slabs or the standard deduction, even as several indirect tax and regulatory measures threaten to increase everyday expenses.

Salaried taxpayers, who had hoped for relief amid rising living costs, found little comfort in the Finance Minister’s proposals. Instead, a series of policy changes announced in the Budget are expected to raise costs and reduce post-tax returns for many households.

One major change is the increase in the Securities Transaction Tax (STT) on futures and options, which will make trading costlier for retail and active market participants. The move is likely to impact individuals who rely on derivatives for investment or income generation.

Investors in Sovereign Gold Bonds (SGBs) will also feel the pinch. While bonds purchased directly from the government will continue to enjoy tax-free redemption at maturity, capital gains on SGBs bought from the secondary market will now be taxable, reducing their attractiveness for some investors.

Another significant decision is the withdrawal of income tax exemption on disability pension for defence personnel who retire on superannuation. Going forward, only those invalided out of service due to disability will be eligible for the tax relief, narrowing the scope of the exemption.

The Budget has also changed the taxation of share buybacks. Gains from buybacks will now be taxed as capital gains in the hands of shareholders, increasing the tax burden for both corporate and individual investors.

Indirect tax measures could add to household expenses. The Tax Collected at Source (TCS) on the sale of alcoholic liquor has been doubled, a move that is expected to push up prices across the supply chain. In addition, the removal of interest deduction on dividend and mutual fund income will affect investors who use borrowed funds, lowering their post-tax returns.

Even everyday workplace expenses may rise. The withdrawal of customs duty exemptions on imported coffee brewing and vending machines is expected to increase costs for offices, cafés and commercial establishments, which could be passed on to consumers.

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With rising costs and no direct tax relief, Budget 2026 has added fresh pressures on the middle class. Experts say the changes make careful financial and tax planning more important than ever for households trying to manage shrinking disposable incomes.