Budget 2026 expectations: Put more money in people’s hands to boost growth

By Umesh Kumar JethaniAs India pushes towards the $5-trillion economy milestone, the Union Budget 2026 has a pivotal opportunity to fuel this growth. Consumption remains the most reliable engine of the Indian economy. Yet, rising inflation, higher EMIs and mounting compliance costs have steadily eroded disposable incomes, especially for the salaried class and MSMEs.If Budget 2026 is to accelerate growth meaningfully, it must leave more money in the hands of taxpayers while making compliance simpler and fairer. Against this backdrop, the following measures can pump money into the economy and support the salaried class and small businesses: Rework basic exemption and tax slabs to reflect inflation realityThe 30% tax bracket now applies from ₹24 lakh onwards—a threshold that no longer reflects urban living costs or salary inflation. To restore purchasing power and reward upward mobility, the highest slab should begin at ₹36-40 lakh. This adjustment would immediately increase discretionary spending among middle and upper-middle income earners, translating into higher consumption and tax buoyancy over time. With prices rising across essentials, the basic exemption limit must move up to at least ₹5 lakh. The Section 87A rebate should also be accordingly recalibrated.Update Home Loan Interest Deduction to Match Market PricesThe housing sector has a strong multiplier effect across several sectors, including steel, cement, labour and financial services. However, with property prices and EMIs soaring, the ₹2 lakh cap under Section 24(b) has become outdated. Doubling it to ₹4 lakh would provide a meaningful incentive for homebuyers, revive housing demand and support the broader economy.Expand Section 80D to Tackle Rising Healthcare CostsHealthcare inflation far outpaces headline CPI. Yet, deductions for medical insurance under Section 80D remain constrained. Raising the limit to ₹1–1.25 lakh would encourage adequate insurance coverage and reduce households’ dependence on savings during medical emergencies—strengthening financial resilience.Increase Standard Deduction to Ease Employment CostsThe standard deduction under Section 16(ia) should be raised to ₹1 lakh and made uniform across both tax regimes. This would account for rising employment-related expenses such as commuting, technology and skill upgradation. To manage fiscal impact, the benefit could be withdrawn for salaries exceeding ₹1 crore, ensuring progressivity without diluting relief for the mass salaried class.Bring Tax Parity for LLPs and Partnership FirmsWhile companies enjoy a 25% corporate tax rate, LLPs and partnership firms continue to be taxed at 30%. This disparity discourages small business formation and scale-up. Aligning their tax rate with corporate entities would promote entrepreneurship, expansion and job creation—without distorting the tax base.Reward GST Compliance Through Income Tax IncentivesFormalisation cannot rely solely on penalties. To widen the tax base, GST-compliant businesses should receive tangible income-tax incentives or rebates. Such a carrot-based approach would encourage voluntary compliance, expand registrations and improve revenue sustainability.Allow Inter-State Services for Composition DealersService providers under the GST Composition Scheme are barred from inter-state trade, severely limiting growth opportunities. Allowing inter-state supply of services would open national markets to small service providers, boost incomes and strengthen economic integration—without undermining revenue.(Umesh Kumar Jethani is co-founder, Apkireturn)