"Zero Relief": Why Budget 2026 Ignored the Salaried Class

For the Indian middle class, Budget 2026 was less about what was announced and more about what was ignored. Despite rampant inflation eating into disposable income, Finance Minister Nirmala Sitharaman kept the income tax slabs unchanged for both the Old and New Regimes in her record-breaking ninth budget presented on Sunday.

The much-hyped "Income Tax Act 2025," set to officially debut on April 1, 2026, promises simpler language—but taxpayers argue that "simpler words don’t pay EMI bills." The silence on raising the standard deduction (stuck at ₹75,000) or the ₹12 Lakh tax-free threshold (under rebate) was deafening. It signals a harsh reality: the government believes the middle class has "enough" and that the burden of nation-building—funding the record ₹12.2 lakh crore capex—must continue to be borne by the salaried taxpayer.

The Context (The STT Hike)

The sharpest blow came for the "newbie" retail trader. In a bid to curb "speculative excess," the budget hiked the Securities Transaction Tax (STT) significantly:

• Futures: Hiked from 0.02% to 0.05% (a 150% jump).
• Options: Hiked from 0.1% to 0.15%.

The Logic: The government wants to protect retail investors from burning cash in the F&O segment, where SEBI data shows 9 out of 10 traders lose money. The Reality: This doesn't just hurt gamblers; it hurts serious retail traders trying to hedge their portfolios. It effectively raises the "break-even" point for every trade. The stock market’s sharp dip on Sunday (Feb 1) wasn't just a tantrum; it was a repricing of this new friction cost.

The Key Players (Who & So What)

• Nirmala Sitharaman (Finance Minister): The Disciplinarian. She chose "Strategic Sobriety" over populism. By refusing to cut taxes, she ensured the fiscal deficit target of 4.3% remains on track, protecting India's credit rating but alienating the vote bank.
• Retail Traders (The "Robinhood" Army): The Casualties. With higher taxes on their trades, many small-time traders will be forced to exit the market. The "Casino" is now more expensive to enter.
• Salaried Employees: The "Abhimanyus." Locked into TDS (Tax Deducted at Source), they have no way to escape the tax net. The lack of inflation-adjustment in tax slabs effectively means they are paying more tax in real terms than they did in 2023.

The BIGSTORY Reframe (The "New Tax Act" Mirage)

While the FM announced the Income Tax Act 2025 to replace the archaic 1961 law, early drafts suggest it is a cosmetic overhaul. It removes obsolete sections and simplifies the filing process, but without a corresponding reduction in tax rates, it offers no financial relief.

• The "Abhimanyu" Trap: The middle class enters the Chakravyuh of taxes (Income Tax, GST on every purchase, Capital Gains on investments, and now higher STT on trading) with ease. But with no new deductions or slab hikes, there is no exit door to save wealth. The system is designed to extract, not to empower savings.

The Implications (Why This Matters)

• For Market Liquidity: The STT hike will likely kill High-Frequency Trading (HFT) volume. Expect spreads to widen (difference between buy and sell price), making it slightly more expensive for everyone to buy stocks.
• For Consumption: Without extra cash in hand (from tax cuts), the middle class is unlikely to splurge on cars or homes this year. This could dampen the very consumption cycle the government wants to revive.
• Small Wins: It wasn't all gloom.
• Foreign Travel: TCS on overseas remittances (education/tour packages) slashed to 2%.
• Accident Relief: Interest on MACT claims is now fully tax-free.

The Closing Question (Now, Think About This)

If the taxpayer funds the highways, the defense corridors, and the digital stack, but their own savings remain stagnant, are they partners in nation-building, or just the financiers of it?

FAQs: Middle Class & Traders

1. Did income tax slabs change in Budget 2026? No. Both the Old and New Tax Regime slabs remain exactly the same. There is no change in the tax-free limit (₹3 Lakh basic / ₹7 Lakh rebate) or standard deduction.

2. What is the new STT rate? From April 1, 2026, STT on Futures will be 0.05% (up from 0.02%) and on Options will be 0.15% (up from 0.1%). This makes F&O trading significantly more expensive.

3. What is the benefit for foreign travel? The Tax Collected at Source (TCS) on foreign tour packages and remittances for education/medical needs has been reduced to 2% (down from higher slabs), easing the cash-flow burden for travelers and students.

4. Is the New Tax Regime mandatory now? No. It is the default, meaning if you take no action, your employer will calculate tax based on it. However, you can still file a form to opt for the Old Regime if you want to claim HRA and 80C deductions.

5. When does the new Income Tax Act 2025 start? The new simplified tax code will come into effect from April 1, 2026. It aims to reduce litigation and simplify language, but does not change the tax rates announced in this budget.

Sources

News Coverage

• CNBC-TV18: Budget 2026: No tax relief for salaried class; FM sticks to fiscal path
• Moneycontrol: STT Hike Explained: How F&O trading just got costlier for you
• The Hindu: Income Tax Act 2025 to debut in April; focus on simplification

Context & Analysis

• Ministry of Finance: Budget Speech 2026-27: Part B (Taxation Proposals)