Budget 2026: Tax Relief Key to Unlocking India's Growth Potential
Overview
Union Budget 2026 faces pressure to accelerate India's $5 trillion goal by boosting consumption. Experts urge tax reforms, including higher income tax exemption limits and revised slabs to counter inflation and ease compliance burdens for salaried individuals and MSMEs. These measures aim to inject disposable income, stimulating demand and supporting business growth across key sectors.
Fueling Consumption for $5 Trillion Economy
The Union Budget 2026 presents a critical opportunity to accelerate India's trajectory towards becoming a $5 trillion economy. Analysts emphasize that sustained growth hinges on robust consumption, the nation's most dependable economic engine.
Addressing Easing Disposable Incomes
Persistent inflation, escalating Equated Monthly Installments (EMIs), and mounting compliance burdens have steadily diminished the disposable incomes of Indian households. This erosion is particularly acute for the salaried class and micro, small, and medium enterprises (MSMEs).
Proposed Tax Reforms for Salaried Class
To meaningfully boost growth, the budget must inject more funds into taxpayers' hands. This includes reworking basic exemption limits and tax slabs to reflect current inflation. The highest tax bracket threshold, currently starting at ₹24 lakh, is seen as outdated and should ideally be raised to ₹36-40 lakh. Similarly, the basic exemption limit should be increased to at least ₹5 lakh to restore purchasing power.
Stimulating Real Estate and Healthcare
The housing sector's significant multiplier effect warrants attention. With property prices and EMIs soaring, the ₹2 lakh cap on home loan interest deduction under Section 24(b) needs doubling to ₹4 lakh to revive demand. Concurrently, healthcare inflation necessitates raising the deduction limit under Section 80D to ₹1-1.25 lakh, encouraging adequate insurance coverage and protecting household savings.
Supporting Small Businesses and SMEs
Standard deduction for the salaried class should be elevated to ₹1 lakh, uniform across tax regimes, to account for rising employment costs. Furthermore, aligning the tax rate for Limited Liability Partnerships (LLPs) and partnership firms with the corporate tax rate of 25% would foster entrepreneurship and expansion.
Enhancing GST Compliance
Formalization efforts should incorporate incentives rather than relying solely on penalties. Offering income tax rebates to GST-compliant businesses would encourage voluntary compliance, widen the tax base, and improve revenue sustainability. Allowing composition dealers to engage in inter-state services would also unlock significant growth avenues for small service providers.
