The Union Budget 2026 has left many middle-class taxpayers disappointed, with no changes announced in income tax slabs, rates, or the standard deduction. Salaried individuals had expected some relief amid rising living costs, but the Budget chose to keep the direct tax structure unchanged. Instead, a set of proposals is likely to increase expenses for investors, professionals, and everyday consumers once they come into effect from April 1, 2026.
Here are seven Budget decisions that could hit the middle class the hardest.
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Higher costs for market investors
One of the biggest changes is the increase in Securities Transaction Tax (STT) on derivatives. The STT on futures has been raised from 0.02% to 0.05%. For options, the tax on premium has gone up from 0.1% to 0.15%, while STT on the exercise of options has also increased from 0.125% to 0.15%. These changes will directly raise the trading costs for retail investors who actively trade in futures and options.
Another blow for investors comes from changes to Sovereign Gold Bonds (SGBs). While bonds bought directly from the government at the time of issue will continue to enjoy tax-free redemption at maturity, those purchased from the secondary market will no longer get this benefit. Gains on such bonds will now be taxed as capital gains, reducing their appeal for small investors who buy SGBs through exchanges.
Changes in pensions and corporate payouts
The Budget has also withdrawn income tax exemption on disability pension for defence personnel who retire on superannuation. Going forward, only those invalided out of service due to a bodily disability attributable to service will qualify. This narrows the scope of relief that earlier applied more widely.
Share buybacks have also become less tax efficient. Buybacks will now be taxed as capital gains in the hands of shareholders. Corporate promoters may face an effective tax rate of about 22%, while non-corporate promoters could see taxes rise to nearly 30%, reducing post-tax returns.
Everyday expenses may rise
Alcohol is likely to become costlier as the Tax Collected at Source (TCS) on the sale of alcoholic liquor for human consumption has been proposed to rise from 1% to 2%. While this is collected upfront from businesses, the cost is often passed on to consumers.
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Another lesser-noticed change is the removal of interest deduction against dividend and mutual fund income. Investors using borrowed funds or margin financing will no longer be able to deduct interest costs, lowering effective returns.
Even small workplace comforts may be affected. The withdrawal of customs duty concessions on imported coffee brewing and vending machines could push up costs for cafés, office pantries, and commercial coffee outlets, making your daily cup of machine-brewed coffee slightly more expensive.
