Budget 2026 wish list: Experts call for higher 30% tax slab, inflation-linked slabs, simpler savings 

As the annual focal point of India’s economic calendar, the Union Budget once again commands national attention for the policy signals it sends to households and businesses. Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026, with the Centre having already finalised the schedule for the Budget Session in Parliament. Expectations are high that the government will build on last year’s emphasis on income tax relief and GST rationalisation to sustain domestic demand, even as economists caution that limited fiscal headroom could necessitate a calibrated approach to fresh reforms.

A key area under discussion this year is the structure of personal income tax slabs. With net direct tax collections crossing Rs 17 lakh crore by December 2025 and income tax return filings touching 9.2 crore, there is growing momentum for revisiting slab thresholds. Adhil Shetty, CEO of BankBazaar, said the current framework risks penalising taxpayers through “bracket creep,” as inflation steadily erodes real incomes while slab limits remain unchanged.

He pointed out that the 30 per cent tax bracket has effectively been anchored around Rs 15 lakh since 2020, even though the Cost Inflation Index has risen by about 21 per cent over the same period. “For salaried urban households facing a 7–8 per cent annual rise in living costs, this has meant sustained pressure on disposable income,” Shetty said, adding that indexing slabs to inflation could push the top threshold into the Rs 18–35 lakh range, depending on calibration.

Proposals also include widening intermediate slabs to smooth progression, such as introducing 5 per cent for Rs 4–8 lakh, 10 per cent for Rs 8–12 lakh and 15 per cent for Rs 12–16 lakh. The objective, according to Shetty, is to balance equity and efficiency at a time when data shows that nearly 77 per cent of income tax collections come from just 2 per cent of taxpayers. “Any reform must provide middle-class relief without unduly narrowing the tax base,” he said.

Beyond slabs, attention is also turning to savings incentives under the new tax regime. While the regime has delivered simplicity and is now effectively tax-free up to Rs 12 lakh following the 2025 changes, it offers limited encouragement for long-term financial planning. A proposal gaining traction is a flat 30 per cent deduction on gross income, capped at Rs 15 lakh, covering term life, health insurance, pension products and small savings. Such a structure, Shetty argued, would simplify decisions and better reflect rising costs, particularly as health insurance premiums alone are increasing by 12–15 per cent annually.

The potential impact on consumption could be significant. Incremental disposable income of Rs 50,000 to Rs 1 lakh a year can materially lift spending across housing, automobiles and consumer durables. Housing finance, in particular, remains a key growth lever, strengthening the case for revisiting the affordable housing price cap, currently set at Rs 45 lakh, to better align with urban market realities. For MSMEs, extending ESOP tax parity to Udyam-registered firms could aid talent retention and formalisation.

Another pillar of the Budget 2026 narrative is the role of digital public infrastructure. A proposed Rs 1 lakh crore allocation for Digital India 2.0, focused on platforms such as DigiLocker, Account Aggregator frameworks and agentless 24×7 video KYC, is expected to reduce friction in credit and insurance access. Faster, cheaper and safer financial services could reinforce both compliance and inclusion, amplifying the broader tax and growth objectives of the coming Budget.

Together, inflation-linked tax reform, simplified savings incentives and deeper digital enablement are shaping expectations that Budget 2026 will seek not just fiscal balance, but a durable boost to household confidence and economic momentum.