Finance Minister Nirmala Sitharaman is preparing to present her ninth Union Budget on February 1, 2026. Over the past five years, her tenure has been marked by comprehensive tax reforms that have significantly transformed India's taxation framework, particularly benefiting the salaried class and simplifying tax compliance procedures.

Income Tax Relief for Salaried Class

The most substantial reform came through progressive increases in tax-free income thresholds. In Budget 2025, Sitharaman raised the effective tax-free threshold for salaried individuals to ₹12.75 lakh, which includes a standard deduction of ₹75,000. This marked a significant expansion from Budget 2023, which initially exempted taxpayers earning up to ₹7 lakh annually under the simplified tax regime.

Capital Gains Tax Overhaul

Budget 2024 introduced sweeping changes to capital gains taxation, creating a more uniform structure across asset classes. The short-term capital gains (STCG) rate on certain financial assets increased from 15% to 20%. For long-term capital gains (LTCG), the budget established a uniform rate of 12.5% across all asset classes while removing the indexation benefit that previously helped reduce tax liability by adjusting gains against inflation.

The reforms also redefined holding periods for capital assets, establishing two clear thresholds: 12 months for listed assets such as shares and bonds, and 24 months for other assets including real estate and gold.

New Tax Regime Implementation

The new tax regime underwent a strategic rollout across multiple budgets. Initially introduced as an optional framework in Budget 2020 with concessional tax rates but without certain deductions, it became the default option in Budget 2023. This change required all taxpayers to file under the new regime unless they specifically opted for the old system.

Budget 2024 further refined the new tax regime by introducing revised tax slabs:

• No tax up to ₹3 lakh
• 5% tax between ₹3-7 lakh
• 10% tax between ₹7-10 lakh

Digital Assets and Assessment Reforms

The government addressed emerging financial instruments through Budget 2022, which imposed a 30% tax on virtual digital assets along with an additional 1% TDS on transfers of these assets. This marked the first comprehensive taxation framework for cryptocurrency and other digital assets in India.

Additionally, Budget 2021 streamlined assessment procedures by reducing the time limit for reopening assessments from six years to three years. However, in cases involving serious tax evasion with concealed income of ₹50 lakh or more annually, assessments can still be reopened for up to 10 years.

Enhanced Deductions and Benefits

The standard deduction for salaried employees under the new tax regime increased to ₹75,000 in Budget 2024. The same budget also raised the family pension deduction from ₹15,000 to ₹25,000 for taxpayers following the new regime, providing additional relief for pensioners and their families.

India's economic landscape presents a compelling paradox where macroeconomic success masks underlying household financial stress and stark inequality. Despite achieving impressive growth metrics, the nation grapples with a fundamental question about value and purchasing power that transcends simple monetary calculations.

Household Financial Stress Amid Growth

India's household financial metrics reveal a troubling pattern of debt-driven consumption. The data shows a complex financial reality that demands immediate policy attention.

These figures indicate that households are increasingly relying on debt-financed consumption rather than building sustainable savings, creating a precarious economic foundation despite overall growth momentum.

The ₹500 Value Divide

The purchasing power of ₹500 starkly illustrates India's economic inequality. In Mumbai's fine dining establishments, ₹500 purchases three artistic dumplings with microgreens and sauce. Conversely, the same amount buys a complete vegetarian thali with three curries, rice, sides, and buttermilk at traditional Udipi restaurants.

This disparity extends beyond food service to essential needs across socioeconomic strata:

• Transportation: ₹500 barely covers one-way sleeper class train tickets for migrant worker families traveling from Mumbai to Meerut
• Sustenance: The amount provides a week's meals for auto drivers through twenty vada pavs at ₹20-25 each
• Currency depreciation: The rupee weakened from ₹60 per dollar in 2014 to approximately ₹90 currently

Economic Progress and Persistent Challenges

Despite significant achievements in poverty reduction and economic development, substantial gaps remain. Over the past decade, 171 million people escaped poverty, while multidimensional poverty dropped to 15.50% in 2022-23. GDP per capita increased from $1,212 in 1990 to $11,159 in 2024.

However, critical challenges persist:

Budget 2026 Policy Imperatives

The upcoming budget must address these structural imbalances through comprehensive policy interventions. Priority areas include:

• Tax relief measures to ease middle-class financial pressure and revive household savings
• Production-linked incentives to capitalize on manufacturing sector momentum
• GST reforms to support services sector growth
• Guaranteed social security for gig workers
• Enhanced MSME loan access to support small business growth

Bridging Two Economic Realities

The ₹500 paradox represents more than pricing disparities - it reflects fundamental policy challenges in creating equitable economic growth. Fine dining establishments price imported ingredients in a weakened rupee environment while serving clientele with global lifestyle aspirations. Traditional establishments maintain local pricing structures that haven't fully adjusted to currency depreciation.

This dichotomy requires policy intervention to ensure that economic growth benefits all segments of society. The solution lies in developing targeted interventions that provide the wealthy with increased demand opportunities while empowering disadvantaged groups with greater economic agency.

Path Forward

Budget 2026 presents an opportunity to convert strong GDP growth and controlled inflation into sustainable household financial health. The government must strike a balance between maintaining growth momentum and addressing structural inequalities that leave different segments of society experiencing vastly different economic realities from the same currency denomination.

Success requires acknowledging that currency value is not universal across economic segments and developing policies that account for these disparities. Through equitable policy design focusing on tax relief, employment security, and financial inclusion, India can transform its current growth trajectory into inclusive prosperity that serves all citizens effectively.