Budget 2026: Understanding direct and indirect taxes, how do they impact you

The Union Budget is the government’s most powerful policy document of the year. On Sunday morning, February 1, 2026, at 11 AM, Finance Minister Nirmala Sitharaman will present the Union Budget 2026-27 in the Parliament. It will tell taxpayers what they really want to know.  

As the Union Budget 2026-27 approaches, the first question likely to be on everyone’s mind is: How will this impact my wallet? The answer lies in taxes. From your monthly salary to the groceries in your cart, taxes shape how much you earn, spend, and save.

What are direct and indirect taxes?

Direct Taxes: These are levied directly on your income or wealth. The most common example is income tax, paid by individuals and corporations based on earnings. Wealth taxes, property tax, and corporate tax also fall under this category.

Indirect Taxes: These are levied on goods and services, not directly on your income. Examples include GST, customs duty, excise duty, and service tax. You pay them when buying products or services.

How do direct taxes impact you?

Direct taxes affect the money in your pocket immediately. If income tax rates increase, your take-home salary reduces. For corporations, a higher corporate tax can influence product prices or dividend payouts. Budget proposals on direct taxes also determine how much disposable income individuals and companies have, affecting consumption and investment.

How do indirect taxes impact you?

Indirect taxes influence the cost of everything you buy. A hike in GST or customs duty makes products from electronics to daily essentials more expensive. Conversely, a cut in indirect taxes can reduce prices, boosting consumption. Businesses also adjust their pricing strategies based on indirect tax changes, which can ripple across the economy.

Why does the Union Budget 2026 account for both of them?

Direct and indirect taxes together shape fiscal revenue, spending capacity, and economic growth. The government balances tax rates to fund infrastructure, welfare schemes, and development projects while keeping households and businesses financially stable. For citizens, understanding these taxes reveals how the Budget affects daily expenses, savings, investments, and purchasing power.

In short, whether it’s your salary, your shopping, or your company’s profits, direct and indirect taxes define how Budget decisions touch your life every day.