Finance Minister Nirmala Sitharaman presented Budget 2026 at a time when middle-class households and low-income groups were hoping for tangible tax relief to cushion rising living costs and economic uncertainty. Instead, the Budget has left many in these segments disappointed, with no changes to income tax slabs or standard deductions, even as financial markets reacted negatively and volatility spiked after the announcements.

While the government emphasised stability, fiscal discipline, and long-term reforms, the absence of direct relief has shaped public sentiment – particularly among salaried taxpayers.

Who Is Considered A Middle-Class Taxpayer Here?

In the context of Budget 2026, the middle class broadly includes salaried employees, self-employed professionals, retirees, and small business owners earning regular incomes but not classified as high-net-worth individuals.

Typically, this group falls in the Rs 5 lakh to Rs 20–25 lakh annual taxable income range, relying on salaries, professional income, pensions, or interest earnings. It also includes families managing education loans, healthcare expenses, housing EMIs, and overseas remittances. For this segment, even modest tax relief can materially affect monthly cash flows – which is why expectations going into the Budget were high.

No Tax Slab Changes, A Major Source Of Disappointment

The biggest letdown for the middle class was the decision to leave income tax slabs unchanged. Despite sustained inflation pressures over recent years, the Budget did not raise exemption limits or standard deductions, offering little immediate relief to salaried taxpayers.

Instead, the government announced that a new Income Tax Act will come into effect from April 1, 2026, aimed at simplifying language and reducing disputes. While structurally important, this reform does little to address near-term household pressures, reinforcing the perception that the Budget prioritised long-term stability over present-day relief.

Limited Relief Through Lower TCS On Overseas Spending

One of the few direct benefits for middle-class families comes through reduced Tax Collected at Source (TCS) under the Liberalised Remittance Scheme.

TCS on overseas education and medical treatment has been cut from 5 per cent to 2 per cent, and TCS on overseas tour packages has also been reduced to 2 per cent without a threshold. While helpful for families with international education or medical needs, this relief is seen as narrow in scope, benefiting only a small subset of taxpayers.

Motor Accident Compensation Exemption Welcomed, But Niche

The exemption of interest and compensation awarded by Motor Accident Claims Tribunals from income tax was welcomed as a humane move. However, for most middle-class households, this remains a situational benefit, offering no broad-based tax relief.

Foreign Asset Disclosure Scheme Raises Mixed Reactions

The Budget announced a one-time six-month foreign asset disclosure scheme, offering reduced penalties and immunity from prosecution for eligible taxpayers.

While this may help students, tech professionals, and young earners with overseas income or assets, critics argue that such schemes do little for the wider middle class struggling with everyday expenses and rising costs.

Compliance Eased, But Cash Flow Remains Tight

Measures such as extending the deadline for revising income tax returns till March 31, decriminalising technical defaults, and introducing rule-based automated TDS processes were positioned as steps towards ease of living.

However, for many salaried taxpayers, reduced paperwork and lower litigation risk do not offset the absence of higher take-home pay, especially at a time when household budgets remain stretched.

Market Reaction Reflects Broader Unease

The sense of disappointment among middle-class and low-income groups was mirrored in the market reaction, with equities witnessing sharp volatility after the Budget presentation. Investors appeared concerned about muted consumption stimulus, particularly in the absence of tax relief for large sections of consumers.

Market participants flagged that weaker consumption sentiment could weigh on earnings growth in consumer-facing sectors, contributing to the post-Budget sell-off.

Indirect Relief Falls Short Of Expectations

The exemption of basic customs duty on 17 cancer drugs was acknowledged as a positive healthcare measure. Yet, for most middle-class families, indirect relief of this nature does not compensate for the lack of broader tax cuts or income support.

For the middle class and low-income groups, Budget 2026 has been perceived as a Budget of restraint rather than relief. While the government has stayed firmly committed to fiscal consolidation and long-term reforms, the absence of immediate tax benefits has dampened sentiment.