As the calendar turns to 2026, the Indian salaried class finds itself at a unique crossroads. At Motilal Oswal, we see this year’s Union Budget not just as a fiscal exercise, but as a critical Consumption Booster. With the 8th Pay Commission set to roll out and the Indian economy targeting a steady 7.3% GDP growth, the expectations from the Finance Ministry are high.

For the salaried individual the backbone of India’s tax base the focus is on Disposable Income. In our view, if the government wants to sustain the current market momentum and drive the Viksit Bharat 2047 vision, it must reward the honest taxpayer.

Open Demat account -  Start your investment journey now!

Here are the top expectations for salaried individuals from Budget 2026.

The 8th Pay Commission: A Multiplier Effect

The implementation of the 8th Pay Commission (expected from January 1, 2026) is the single biggest event for over 1.1 crore central government employees and pensioners. Our research indicates that this move will inject significant liquidity into the system.

• Salary Hike Expectation: Estimates suggest a 25% to 35% increase in basic pay, driven by a potential fitment factor of 2.86.
• The Budgetary Link: Taxpayers expect the Budget to adjust income tax slabs in tandem with these hikes. Without slab revision, a large portion of this raise will simply be eaten away by higher tax brackets, a phenomenon known as bracket creep.

Projected Impact on Basic Pay

Standard Deduction: The Inflation Shield

The Standard Deduction is a flat amount subtracted from your salary before tax is calculated. Currently, it stands at ₹75,000 for the New Tax Regime (as of 2025).

The Expectation: Given that medical and transport costs have risen by nearly 10-12% in urban centers, there is a strong demand to raise this limit to ₹1,00,000. This would provide a direct, document-free benefit to every salaried person in India.

Rethinking the 30% Tax Slab

At Motilal Oswal, we often analyze the Quality of Life of the middle class. Currently, anyone earning above ₹24 lakh (under the New Regime) hits the peak tax rate of 30%. In global comparisons, this peak hits Indian professionals much earlier in their career than in other major economies.

• The Demand: Raise the threshold for the 30% slab from ₹24 lakh to ₹40 lakh.
• The Rationale: This would significantly boost Consumer Discretionary spending benefiting sectors like Automobiles, Premium Housing, and High-end Electronics.

Section 80D: Health is Wealth (and Tax Savings)

While the government is nudging everyone toward the New Tax Regime (which currently offers fewer deductions), there is a strong case for introducing a Health Insurance Deduction even in the new system.

• The Reality: Medical inflation is currently hovering around 14%.
• The Wishlist: Salaried individuals are looking for an increase in the deduction limit for health insurance premiums from the current ₹25,000 to ₹50,000. Furthermore, bringing this deduction into the New Regime would encourage people to maintain their safety nets while transitioning to the simpler tax system.

Housing Loans: Reviving the ₹2 Lakh Limit

For years, the deduction for interest on home loans (Section 24b) has been capped at ₹2 lakh. With interest rates stabilizing but property prices in Tier-1 cities reaching new highs, this limit feels stuck in the past.

What we expect to see discussed:

• An increase in the interest deduction limit to ₹3 lakh - ₹4 lakh.
• The potential introduction of a home-loan interest benefit within the New Tax Regime to support the Housing for All mission.

NPS: Towards a Pensioned Society

The National Pension System (NPS) is a cornerstone of our QGLP philosophy for long-term wealth. Currently, an additional deduction of ₹50,000 is available under Section 80CCD(1B).

• The Expectation: Taxpayers want this limit raised to ₹1,00,000.
• Motilal’s View: Strengthening the NPS not only secures the individual's future but also provides long-term capital for nation-building projects, a win-win for the economy.

Summary of Key Expectations

Final Thoughts: The Motilal Oswal Perspective

Budget 2026 holds the potential to be a Sentiment Game Changer. By putting more money into the hands of the salaried class, the government can trigger a virtuous cycle of Savings → Investment → Growth.

For you, the salaried investor, our advice remains: Buy Right : Sit Tight. While tax savings are a great bonus, your primary focus should be on staying invested in quality businesses that can beat inflation over the next decade.