Union Budget 2026-27: Middle Class May Face BIG Setback; Know Finance Minister Nirmala Sitharaman's Plans

New Delhi: As the Union Budget 2026 approaches, the expectations of salaried and middle-class taxpayers have risen once again. Amidst inflation, rising EMIs, and increasing daily expenses, people want the government to provide significant income tax relief this time to increase their disposable income.

However, according to tax experts, the chances of major tax cuts this time are slim. The reason is clear: the government has already made significant changes to the income tax system in the last few budgets, and now the fiscal space is quite limited.

What did the experts say?

Tax expert Dinkar Sharma told the Financial Express that the government believes that most of the major reforms in personal income tax have already been implemented. The new tax regime, with fewer slab rates, higher rebates, and simpler rules, has been seen as a long-term reform, not a temporary relief. Furthermore, due to heavy spending on infrastructure, defense, and social schemes, the government does not have much room for major tax cuts. Now, taxpayers also want more practical changes than big announcements, such as adjustments to tax slabs based on inflation, improvements in exemption limits, and easier compliance.

Deepesh Chheda, Partner at Dhruva Advisors, also believes that considerable relief has already been provided in corporate and individual taxes in the last few years. The corporate tax rate was reduced to around 25%, resulting in a significant revenue loss for the government. Individual taxpayers have also benefited through the new tax regime. Moreover, due to the GST rate rationalization in October 2025, the government had to forgo approximately Rs 48,000 crore in revenue. Therefore, it may be difficult for the government to implement major tax cuts in Budget 2026.

What is the government's priority?

According to CA Vineet Dwivedi, the government's priority is currently economic stability and investment-led growth rather than tax relief. Although the fiscal deficit has decreased from 9.2% in FY21 to 5.6% in FY24, nearly 40% of tax revenue is still spent solely on interest payments. At the same time, capital expenditure has reached record levels. Therefore, experts clearly state that instead of headline-grabbing tax cuts, the 2026 budget will likely feature smaller, targeted changes. This means the middle class can expect more stability and fewer surprises.