MarginNote

Budget 2026 pushes capex and fiscal consolidation, but leaves the middle class with higher costs, fewer deductions, and a stark contrast against corporate tax holidays. Budget 2026: The Middle Class Nightmare Budget 2026 emphasizes fiscal consolidation and focuses on capex growth, basically infrastructure-led growth and increase in investments on technology and clean energy. Bored yet? I am not here to talk about what reforms were made or what sectors see an increase in expenditure (Defence saw an increase of 15% - bullshit), what I am going to talk about though is how this budget, without any coincidence, blatantly ignores the needs of the middle class (who constitute about 35% of India's population) and benefits the rich people. Now don't get me wrong, the Indian Government is focusing on growth, but that growth has two sides to it, which we will explore together in a bit. But first let's see what changes have been made to the budget that actually matter, I mean, to the middle class. The Middle Class Gets Nothing So, the budget reforms basically provide zero direct benefits to the middle class. There are no changes in the income tax slabs, or changes in exemption for tax (the ₹1.5 lakh limit under Section 80C remains unchanged). This comes after Budget 2025 gave some relief by raising the tax-free income to ₹12 lakh under the new regime, so this year, FM Sitharaman literally just said "here's what you got last year, enjoy that again." No new relief. Nothing. But here's where it gets worse. There is a 50% hike on Securities Transaction Tax (STT) for Futures and Options (F&O). Let me break that down: STT on futures contracts jumped from 0.02% to 0.05%, that's a 150% increase. For options, STT on premiums went from 0.10% to 0.15%. According to market data, 91% of individual F&O traders in India lost money in FY25, with total losses hitting ₹1.06 lakh crore. And now the government is making it even more expensive to trade. If you're an active trader, you're now paying significantly higher costs, eating into already thin margins. This is coupled by the fact that there will be no deduction of taxable income if you earn from mutual funds or securities using borrowed money. Basically what this means is that if a person uses loan money to earn from mutual funds, earlier they were allowed to deduct the interest paid (up to 20% of the income), and then the tax was charged. But now, they do not provide you this option, you will be charged tax on the full income. Previously, if you earned ₹1,00,000 in dividends and paid ₹25,000 in interest on the loan, you could deduct ₹20,000. Now? You pay tax on the full ₹1,00,000. For someone in the highest tax bracket, this effectively means an additional tax burden on dividend income from leveraged investments. And let's talk about the real pain point. By March 2025, there were more than 28 crore borrowers with an average loan amount of ₹4.8 lakh, a 40% increase since 2021. Household savings are at a 50-year low (just 5.3% of GDP), while household debt has risen to over 41% of GDP. People are struggling - rent, food, education costs are all skyrocketing. Outstanding education loans shot up from ₹65,300 crore in 2020 to ₹1.29 lakh crore in 2024. So the middle class is drowning in debt, their savings are at historic lows, and what does Budget 2026 do? Absolutely nothing to help. No income tax relief. No change in exemptions. Just higher taxes if you're trying to invest and higher costs if you're trading. The Biggest News: Tax Holiday Till 2047 for Foreign Cloud Giants The biggest news from this whole budget is that foreign investors are being lured to use our data centers. They are being given a tax holiday until 2047, that's basically 0% tax for providing cloud-based services if you use data centers located in India. On the surface, it seems like a good deal right? The Indian Government is focusing on long-term growth by attracting foreign investment. This seems right on face value. But when you dig deeper, you see that a few "coincidences" line up. The Adani-Ambani Data Center "Coincidence" Any chance you saw the trending "Master stroke for A2"? If you don't know what this is, it refers to Mr. Adani and Mr. Ambani. You see, both of them signed new data center deals, to be specific, Mr. Adani signed a deal to partner with Google to build a data center in Visakhapatnam (Andhra Pradesh), with an investment of $15 billion over five years, with Mr. Adani eyeing $5 billion himself through his joint venture AdaniConneX. The project will span 480 acres and create a gigawatt-scale AI data center. Meanwhile, Mr. Ambani announced plans to build two gigawatt-scale data centers, one in Jamnagar (a 3 GW facility, reportedly set to be the largest in the world), and another 1 GW facility in Visakhapatnam. Through his joint venture, Reliance is investing approximately ₹98,000 crore by 2030 in Andhra Pradesh alone. Now of course, the government had no knowledge of these massive data center deals being signed. And yes, the tax cuts just happened to be introduced at the exact same time these deals were announced. I DON'T BELIEVE THIS AT ALL. Breaking Down the Tax Holiday Let me be clear about what this tax holiday means. Foreign cloud service providers like Google, Microsoft, Amazon Web Services, they can now provide cloud services to customers globally from Indian data centers and pay zero tax in India until 2047. That's over 20 years of tax-free income. To put this in perspective: while retail investors just lost their ability to deduct interest expenses on borrowed investments, and F&O traders are getting slammed with 50-150% STT hikes, Google and other tech giants get a free pass for two decades. I know that data centers are going to be a big thing in the future. India's data center capacity is projected to more than double to over 2 GW by FY 2026-27. The government argues this will create jobs (the Google-Adani project alone is expected to generate 20,000-30,000 jobs), attract foreign investment, and position India as a global AI hub. Fine. I get it. But cutting them a tax break for 20+ years is absurd. Especially when you're simultaneously squeezing the middle class. The government is essentially saying: "We believe in you, foreign cloud giants. Here's 20 years of tax-free operation. But you, middle-class investor trying to build wealth with a small loan? Sorry, pay full tax now. You, a retail trader trying to make some extra income? Here's a 150% STT hike." The optics are terrible. And the contrast is infuriating. The Uncomfortable Contrast Let me lay this out clearly: - Retail investors: Deductions removed for interest on borrowed investments. You're now taxed on gross income, no relief for the interest you paid. - Middle-class salaried folks: Limited to no relief. Income tax slabs unchanged. Section 80C limit unchanged at ₹1.5 lakh. Standard deduction remains at ₹75,000 under the new regime. - F&O traders (many of whom are middle-class): Hit with a 50-150% STT hike, eating into already thin margins when 91% already lost money last year. - Foreign cloud giants: Tax holiday till 2047. Zero tax if you route services through Indian data centers. Essentially a free 20-year pass. This is not fiscal prudence. This is not "balanced growth." This is a clear prioritization of big corporate interests over the struggling middle class. The Broader Context: A Budget That Ignores Immediate Pain Budget 2026 largely ignores immediate pain points like inflation, stagnant wages, and high household debt. Sure, there's a ₹12.2 lakh crore public capex push—roads, railways, infrastructure. Great for long-term growth. But what about now? Household debt is at over 40% of GDP. The cost of food, education, rent, transport, all rising. And what does the budget offer? Nothing direct. No consumption stimulus. No targeted relief for debt-stressed households. Instead, we get ₹90,000 crore in incentives for semiconductors and biopharma that favor big players. We get tax holidays for foreign investors in data centers. We get preferential tax rates for foreign companies in aircraft leasing. We get customs duty exemptions for large manufacturers. The budget's fiscal deficit target is 4.3% of GDP. Great, fiscal discipline is important. But at what cost? The government is cutting the deficit by holding back on spending that could help the middle class, while simultaneously giving away massive tax holidays and incentives to big corporates and foreign firms. What About Startups? Oh, and let's talk about Minimum Alternate Tax (MAT). Budget 2026 proposes to exempt non-residents paying tax on a presumptive basis from MAT. This benefits foreign companies providing services like cruise operations and aircraft leasing. More tax relief for foreign entities. Meanwhile, the removal of MAT benefits for domestic companies hurts startups and new companies that often operate at losses in early years and rely on MAT credits to reduce tax burden once profitable. Again, the contrast: relief for foreign companies, restrictions for domestic startups. Final Thoughts I'm not against attracting foreign investment. I'm not against building world-class infrastructure. But when you're doing that at the expense of the middle class, when you're giving 20-year tax holidays to foreign giants while simultaneously removing deductions for retail investors and hiking taxes on traders, something is deeply wrong. Budget 2026 is a clear signal: the government's priorities lie with big corporates and foreign investors, not with the average Indian household drowning in debt and struggling to make ends meet. The "Master stroke for A2"? More like a master stroke against the middle class.