'Middle Class Taxed For Surviving, Not Thriving': Expert Urges Fix In Budget 2026

As Finance Minister Nirmala Sitharaman prepares to unveil Union Budget 2026 on February 1, chartered accountant Himank Singla has urged a major rethink in how salaried individuals are taxed. Singla told NDTV that the current flat Rs 75,000 standard deduction fails to reflect the economic reality of most working Indians. 

"If companies are taxed on net profit and not on gross turnover, the same logic must apply to individuals," he said.

Singla pointed out a fundamental inconsistency in India's tax architecture. "In corporate taxation, a basic principle is universally accepted: tax is levied on net profit, not on gross turnover," he said. "Businesses are allowed to deduct rent, interest, depreciation, employee costs, and other unavoidable expenses before arriving at taxable income."

"Yet, when it comes to salaried individuals, this principle is abruptly abandoned," he added.

He said the presumption that salary is disposable income the moment it is credited is flawed. "What they receive first is an obligation-laden income, already earmarked for rent, EMIs, transport, insurance, and basic household costs. Taxing salary without meaningfully recognising these unavoidable expenses is effectively taxing survival, not surplus."

With inflation eroding real incomes, Singla said the tax system has failed to keep pace. "In most urban households today, housing alone consumes 30 to 40% of salary, while education, healthcare, and insurance have shifted from optional to compulsory expenses. After these costs, what remains is not luxury but...modest savings meant for emergencies or retirement."

The flat deduction, he argued, is blind to this burden. "Ignoring this reality and applying a flat standard deduction assumes that a Rs 10 lakh earner and a Rs 50 lakh earner face identical cost pressures, which is fundamentally incorrect."

Instead, Singla proposes a percentage-based standard deduction. "It would restore fairness by aligning taxation with economic reality. Just as businesses deduct expenses proportionate to their scale, individuals should be allowed a deduction linked to income, reflecting the rising absolute cost of living as income increases."

"This would not be a concession, but a structural correction and thus moving the system closer to taxing net savings rather than gross receipts," he said.

Calling the salaried middle class "the highest in compliance and certainty of taxation," Singla said the current model penalises their transparency. "They cannot under-report income, shift profits, or defer taxes...The outcome is not progressive taxation but silent erosion of purchasing power and morale."