Budget 2026 Expectations: Will the Government Raise the 30% Income Tax Slab and Link It to Inflation?
As Budget 2026 approaches, expectations among salaried taxpayers and the middle class are steadily rising. One of the most discussed demands this year is a possible revision of the 30 percent income tax slab, along with linking tax slabs to inflation. Tax experts believe such a move could provide much-needed relief to taxpayers whose real income has been eroded by rising living costs.
Inflation Has Reduced Real Income
Salary hikes often sound encouraging on paper, but for many middle-class families, they have failed to improve actual purchasing power. Persistent inflation has significantly increased the cost of essentials such as housing, healthcare, education, fuel and daily necessities. As a result, many salaried individuals have moved into the highest tax bracket, even though their standard of living has not improved proportionately.
This situation has intensified calls for a tax system that considers inflation while defining income slabs. Taxpayers argue that without periodic slab revisions, a large portion of their income ends up going towards taxes rather than savings or consumption.
Why Experts Want the 30% Slab to Be Revised
Currently, under the new income tax regime, individuals earning more than ₹24 lakh annually are taxed at 30 percent. According to tax professionals, this threshold is too low when adjusted for inflation and changing salary structures.
Anil Harish, Partner at DM Harish & Co, points out that due to relatively low slab limits, even individuals at the early stages of their careers are falling into the top tax bracket. Young professionals, particularly engineering graduates with competitive salary packages, are being taxed at the highest rate despite not having high disposable income. This, experts warn, creates a perception of tax as a burden rather than a civic contribution.
Demand to Link Tax Slabs With CPI
While recent Union Budgets have provided some relief to taxpayers, experts believe a systematic approach is required. Many are advocating that income tax slabs should be linked to the Consumer Price Index (CPI), with automatic annual adjustments and a comprehensive review every five years.
Akhil Chandana, Global People Solutions Leader at Grant Thornton India, suggests that the income threshold for the 30 percent slab should be increased significantly, possibly to around ₹35 lakh. Without inflation-linked adjustments, rising prices steadily push taxpayers into higher slabs, increasing their tax liability without any real gain in income.
Benefits of Raising Tax Slabs
Increasing tax slabs may initially result in a marginal loss of direct tax revenue for the government. However, experts argue that the long-term benefits could outweigh the short-term impact.
SR Patnaik, Partner at Cyril Amarchand Mangaldas, explains that higher disposable income in the hands of the middle class would boost consumer spending, leading to higher GST collections. Increased consumption could also help reduce inflationary pressures and support economic stability.
Moreover, higher post-tax income would encourage savings and investments, strengthening capital formation and supporting overall economic growth. A simplified and fair tax structure could also improve tax compliance, as taxpayers would feel less pressured by high marginal tax rates.
Who Stands to Gain the Most?
The biggest beneficiaries of a revised tax slab structure would be salaried taxpayers. A lower tax burden would reduce TDS deductions, increasing monthly take-home salaries. Bonuses and performance incentives would also attract less tax, improving overall compensation.
Self-employed individuals would benefit as well, as they would retain more funds to reinvest in their businesses. Retirees living on fixed incomes could also see relief, especially as rising healthcare expenses continue to strain post-retirement finances.
Will Budget 2026 Deliver Relief?
While there is no official confirmation yet, expectations are high that Budget 2026 could address these concerns. Linking income tax slabs to inflation and revising the 30 percent slab threshold would mark a significant shift towards a more equitable tax system.
If implemented, such measures could restore balance between income growth and tax liability, ensuring that taxpayers are not penalized simply for keeping pace with inflation. All eyes are now on the upcoming budget to see whether the government responds to these growing demands.
