Budget 2026: Will the 30% Tax Slab Limit Rise to Rs 35 Lakh? Expert Opinions and Financial Equations

With Union Budget 2026 just around the corner, set to be presented by Union Finance Minister Nirmala Sitharaman on February 1, expectations among the middle class and salaried employees are reaching a fever pitch. The biggest buzz in financial corridors is the proposal to hike the 30% tax slab threshold from the current Rs 24 lakh to Rs 35 lakh.

If this proposal sees the light of day, it could arguably be the most significant tax relief for the middle class in over a decade. Currently, under the New Tax Regime, income above Rs 24 lakh attracts a 30% tax rate, a figure experts believe is increasingly out of sync with rising inflation and evolving lifestyles.

Context and Background: How We Got Here

To understand the weight of the expectations for Budget 2026, we must look back at the trajectory of recent fiscal changes.

• The Budget 2025 Context: Last year, the Finance Minister made the New Tax Regime the 'default' option and pushed the 30% tax bracket from Rs 15 lakh to Rs 24 lakh. Additionally, the Standard Deduction was increased from Rs 50,000 to Rs 75,000.
• The Current Status: In the ongoing financial year (FY 2025-26), salaried taxpayers earning up to Rs 12.75 lakh effectively pay zero tax (after accounting for rebates and standard deductions).
• The Latest Demand: Leading industry bodies like CII and FICCI have argued in their pre-budget memoranda that due to the skyrocketing 'cost of living' in metros and Tier-2 cities, an income of Rs 24-35 lakh no longer falls under the 'super-rich' category. Hence, there is a pressing need to push the highest tax bracket further up.

Detailed Analysis: Current vs. Proposed Tax Slabs

A shift in the 30% threshold to Rs 35 lakh would have a direct, tangible impact on your monthly take-home salary. Here is a comparative breakdown of the current (FY 25-26) and expected (FY 26-27) scenarios:

Note: Experts believe that by reducing the tax rate for the Rs 24 lakh to Rs 35 lakh bracket from 30% to 25%, taxpayers could see direct annual savings ranging from Rs 50,000 to Rs 1.5 lakh.

The Financial Implications: Beyond the Individual

This potential shift isn't just about personal pocketbooks; it carries broad implications for the national economy.

Market Sentiment: Reacting to these whispers, the Sensex and Nifty have already shown a positive trend over the last week, particularly in consumer durables and banking stocks. Investors are betting that lower taxes will lead to higher disposable income, fueling consumption.

Fiscal Deficit Concerns: According to government sources, raising the limit to Rs 35 lakh could cost the exchequer approximately Rs 35,000 - Rs 40,000 crore. However, the counter-argument is that this will boost consumption, which will eventually offset the deficit through increased GST collections.

Sector-Wise Impact:

1. Real Estate: Improved home loan repayment capacity.
2. Automobile: A potential surge in the sales of premium vehicles.

Regional Focus: The Rajasthan and Jaipur Perspective

For Tier-2 cities like Jaipur, this proposal holds special significance.

1. The MSME Sector: Many entrepreneurs in Jaipur's Vishwakarma and Sitapura industrial areas operate as proprietorship firms and fall under individual income tax slabs. A higher 30% threshold means these small business owners (SMEs) will retain more 'working capital' to reinvest in their business expansion.
2. Tourism and Service Sector: Rajasthan's tourism economy thrives on the spending power of the middle and upper-middle class. If residents of metros like Delhi and Mumbai save more on taxes, they are likely to spend more on vacations and destination weddings, directly benefiting Rajasthan's economy.
3. Government Employees: Rajasthan has a massive base of government employees who, post the 7th Pay Commission, find themselves in higher income brackets. Relief on income above Rs 24 lakh would provide them a better window to increase their retirement savings (NPS).

Expert Analysis: What the Pros Think

We spoke to some of the country's leading tax minds on this developing story:

• Richa Sahni (Partner, Grant Thornton Bharat): "Since Budget 2025 saw major slab overhauls, we expect the government to focus on 'targeted relief' in 2026 rather than 'big-bang' changes. Moving the 30% slab to Rs 35 lakh is a logical step because the Rs 24 lakh limit feels inadequate given the expenses in metro cities."
• Akshay Jain (Direct Tax Partner, NPV & Associates): "The government's focus is now on easing compliance. Simply changing the slabs won't be enough. We expect the Standard Deduction to also be raised from Rs 75,000 to Rs 1 lakh, a long-standing demand of the middle class."

The Comparative View: Last year, the government went all out to make the New Tax Regime attractive. Data suggests that over 70% of taxpayers have already migrated. The Rs 35 lakh proposal could be the final nudge to bring that figure closer to 100%.

Next Steps and Timeline

• February 1, 2026: The Finance Minister will present the Budget in Parliament.
• April 1, 2026: If passed, these changes will apply to the new financial year (FY 2026-27).
• Advice for Taxpayers: Do not liquidate any investments just yet. Wait for the formal announcement. If the slabs are revised, you will need to align your tax planning for FY 2026-27 starting this April.

Conclusion

The middle class is looking at Budget 2026 with bated breath. Raising the 30% tax slab to Rs 35 lakh would not only be a win for the taxpayer but a catalyst for the economy by stimulating demand. We will have to wait until February 1st to see if the Finance Minister actually pulls off this 'masterstroke.'