Possible plan of the government: The middle class and taxpayers have big expectations from the Union Budget 2025. The reason for this is the recent media reports, which said that the government is considering cutting income tax to increase consumption. Especially, taxpayers with annual income of Rs 15-20 lakh have great expectations from this budget. Currently, in both the new and old tax regimes, those with income above Rs 10-15 lakh have to pay 30% tax rate.
Tax cut necessary to increase consumption
Economists and industry representatives believe that reducing taxes on the middle class will boost consumption in the country. This will not only provide relief to the public but will also give impetus to the economy.
New tax regime and its benefits
New tax regime started in 2020
The government had introduced a new tax regime in 2020 to simplify and simplify income tax. In this arrangement announced by Finance Minister Nirmala Sitharaman, provision was made for lower tax rates, but the benefit of tax deductions and other exemptions was not given.
How did the new regime get positive response?
Initially, taxpayers did not like the new regime much. But, the government’s efforts to make it attractive gradually attracted people’s attention. Now about 72% taxpayers are using this new system.
Less paperwork becomes the main attraction of the new regime
The biggest advantage of the new regime is its less paperwork. Less documentation processes have made it simple and convenient for taxpayers.
Middle class and tax challenge
No tax burden on income up to Rs 5 lakh
According to the Income Tax Department, 70% of people who filed returns in assessment year 2023-24 had taxable income of Rs 5 lakh or less. This means that the tax liability on them is almost negligible.
Situation of people with income up to Rs 10-15 lakh
In the last years, the increasing effect of inflation has affected the financial condition of people with income up to Rs 10-15 lakh. Especially in metro cities like Delhi and Mumbai, it has become difficult to live on this income.
Need for balance between inflation and taxes
Effect of inflation and importance of tax exemption
Due to inflation, the middle class is having difficulty in meeting its needs. In such a situation, the move to make income up to Rs 10 lakh tax-free can provide relief to crores of people.
Revenue and taxpayers’ contribution
94% of tax return filers have income less than Rs 15 lakh. The government gets maximum revenue from those taxpayers whose income is more than Rs 10-15 lakh. Therefore, the tax exemption will not only provide relief to the public, but it can also benefit the economy in the long run.
