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Indian society is characterized by a unique sociocultural phenomenon rooted in the caste system, which fundamentally stems from religious beliefs endorsed by Hinduism. This caste system and its structure of rigidity do not exist outside the context of Hinduism. Caste-based inequality and hierarchical perspectives influence every facet of life in India. Those most adversely affected by this escalating inequality are individuals born into the stigma of untouchability. Casteism represents a cruel social structure that is a primary contributor to many societal issues in India, as it oppresses the untouchables, or Dalits, and denies them the opportunity for personal development. In response to this historical discrimination and dominance by higher castes, the Government of India implemented a reservation policy shortly after gaining independence to ensure equal opportunities for all. The central inquiry of this article is whether the reservation policy effectively provides equal opportunities for all Dalits and to what extent it contributes to the abolition of the untouchability system or whether it has instead fostered a new form of untouchability, termed ‘working-sector untouchability’ or ‘psychological/mental untouchability’, particularly among educated individuals in Indian society. The primary aim of this article is to identify the significant challenges within the reservation system that prevent all Dalits from benefiting and to explore the emergence of working-sector untouchability or psychological/mental untouchability as a consequence of the reservation policy. Finally, the article concludes with insightful recommendations based on the author’s practical experiences.