Budget 2026: Relief for India’s aam aadmi lies in the fine print
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This year, the aam aadmi isn’t expecting tax cut bazooka or big bang announcements, especially after the Modi government did most of the heavy lifting last year and reduced the effective tax liability to zero for those earning up to 12 lakh rupees a year, a move that directly benefits over 80% of India’s taxpayers. Months later, it reduced the GST rates on nearly 400 products and services, greatly reducing the costs of products largely consumed by the middle class.
What can Budget 2026 still deliver?
So, although expectations remain weak, Budget Day is far from dull. With easy gains in hand, attention now turns to whether Finance Minister Nirmala Sitharaman can find room for targeted measures that boost growth and ease pressure on household budgets.
Economic Times spoke to India’s leading economists and suggested that the middle class might have something to take away from this year’s budget.
India Budget 2026 detailed edition
With significant GST rates cuts, the government can plausibly argue that the middle class has already received meaningful financial relief, Deloitte Partner Harpreet Singh said in an email response to ET. Administrative reform with rationalization of rates deserves greater urgency, he said, adding that ongoing disputes, delayed refunds and procedural complexity were quietly eroding the purchasing power of the middle class, especially for small professionals and self-employed taxpayers.
Also Read: Eliminate or reduce TDS, ease EV purchasing and more; “What should Budget 2026 do for individual taxpayers? “So the real opportunity in this Budget lies in indirect tax reforms that reduce compliance costs and streamline working capital. Measures aimed at unlocking working capital through effective reimbursement mechanisms and uninterrupted Input Tax Credit (ITC) can be expected. Allowing refund of ITC on capital goods through appropriate changes in refund formulas is an example of this.”
Similarly, automatic repayment mechanisms can also be introduced, which will positively impact the working capital of many exporters, Singh added.
Faster refunds, simpler compliance and smoother input tax credits could free up cash stuck in the system and improve monthly cash flows for small professionals, traders and the self-employed. Indirect tax reforms can quietly increase purchasing power and reduce financial stress by reducing frictions rather than rates; This could provide relief that occurs throughout the year, rather than on Budget Day.
In terms of easing the burden of compliance, “consolidation of inspections under GST, simplification of the registration process under GST, digitalization of the Customs litigation process and revamping of the Special Valuation Branch process for assessing related party imports are some of the key changes that could bring a lot of relief.”
Rationalization of customs duty on electronics, mobility and energy-efficient products offers another opportunity, he said. “Lower input and import costs could facilitate retail prices without financial losses or demand-side distortions.”
Union Budget 2026 support for exporters’ currency
KPMG India Partner and National Head of Indirect Tax, Abhishek Jain, has suggested a game-changing move that could unlock “stuck” working capital for India’s services exporters.
He said the long-awaited legislative change on ‘brokerage’ services could be transformational by treating facilitation services from India as exports, enabling zero-rating and unlocking significant working capital for foreign exchange earners currently stuck in repayments due to interpretation disputes.
Also Read: Budget 2026 could put India’s manufacturing return to the ultimate test
Currently, many facilitation services offered from India to overseas customers are classified as “brokerage” services and treated as domestic supply even if payments are received from abroad. This prevents them from being recognized as exports, preventing zero-rating and leaving large amounts of working capital tied up in repayment disputes.
According to Jain, the finance minister may suggest that the government plans to change the law or make clarifications on “intermediary services” that will benefit exporters.
He added that from an investment perspective, the market will also watch for targeted policy and incentive announcements that can strengthen India’s manufacturing and investment narrative, especially expansion or tweaking of PLI-style schemes in focus areas such as automotive, semiconductors, electronics, defence, aerospace, civil aviation and capital goods.
Budget tracking: Debt funds await return
Another important expectation on the investment front revolves around debt funds and tax incentives shaping retail investor behavior.
Describing mutual funds as a preferred investment avenue for retail investors, Piyush Gupta, Director, Financial Services, Crisil Intelligence, said that while equity funds continue to attract strong inflows, net investment in debt funds has slowed down since the removal of indexation benefits from April 1, 2023.
Therefore, there is an expectation from Budget 2026 to restore tax benefits for debt funds, he told ET Online. “Such a move would be crucial to reviving investor interest, increasing confidence in fixed income products and increasing the flow of household savings into the bond market, thereby strengthening the broader financial ecosystem.”
The 2026 budget may not produce fireworks, but the small print could be important: streamlined taxes, faster repayments and revived debt fund benefits could put money back into households’ pockets and keep the investment engine humming.
