The Union Budget 2026–27, presented on February 1, 2026, was framed against global economic uncertainty and projected India’s GDP growth at 7.4%, reaffirming its position as the fastest-growing major economy. The Finance Minister emphasized infrastructure, manufacturing, and youth-driven initiatives as pillars of long-term expansion. While the budget showcased fiscal discipline and optimism, it fell short in addressing deep-rooted structural issues in taxation and equity.

1. Agricultural income and the tax net

One of the most glaring omissions was the continued exemption of agricultural income from taxation. Successive governments have avoided this politically sensitive reform, despite widespread acknowledgment that agricultural income is often misused as a conduit for money laundering and converting black money into legitimate earnings. By not addressing this loophole, the government missed an opportunity to broaden the tax base, enhance transparency, and ensure fairness in the system. The exemption disproportionately benefits wealthy individuals who exploit it, rather than genuine small farmers, thereby undermining the credibility of the tax regime.

2. Neglect of the middle class taxpayer

The middle class, which forms the backbone of India’s tax-paying population, found little relief in this budget. No significant changes were introduced in personal income tax slabs or deductions, leaving salaried taxpayers burdened with high effective tax rates. At the same time, the government continues to channel substantial resources into welfare schemes and subsidies targeted at specific social groups.

This dual reality—where the middle class pays heavily while others benefit from both monetary transfers and reservation policies—creates a perception of inequity. The upper-caste middle class, in particular, feels squeezed between rising living costs, stagnant tax relief, and limited access to affirmative action benefits. The budget could have been a platform to rationalize subsidies, expand tax relief for honest taxpayers, and balance welfare with fairness. Instead, it reinforced existing disparities.

3. Freebies vs. fiscal discipline

While the government highlighted fiscal prudence, with a fiscal deficit target of 4.3% of GDP, the allocation of funds reveals a tilt toward populist measures. Welfare schemes for SC/ST/OBC/Minorities continue to expand, often funded by taxes collected from the middle class. This redistribution, though politically expedient, raises questions about sustainability and fairness. The budget did not attempt to recalibrate this imbalance, nor did it introduce reforms to ensure that benefits reach only the genuinely needy.

4. A missed reform moment

The Union Budget 2026–27 could have been a watershed moment for tax reform—bringing agricultural income into the tax net, rationalizing subsidies, and offering tangible relief to the middle class. Instead, it chose continuity over boldness. While the focus on infrastructure and growth is commendable, the lack of structural tax changes makes this budget a missed opportunity.

Conclusion

The budget reflects confidence in India’s growth trajectory but fails to address the inequities in its taxation system. By ignoring agricultural income taxation and neglecting middle-class relief, the government has perpetuated a system where honest taxpayers shoulder the burden while others enjoy dual benefits. In essence, the Union Budget 2026–27 is a forward-looking economic document but a backward step in tax justice—a missed chance to correct long-standing inequalities and strengthen the social contract between the state and its citizens.

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