For India to sustain strong economic growth, policymakers must go beyond optics and tax cuts. Only then will the “middle-class bonanza” translate into real economic momentum.
The government set a tax collection target of Rs 13.8 lakh crore during the interim budget in February, which was revised to Rs 13.35 lakh crore when budget was presented in July.
FM Sitharaman also announced the govt will set up 5 university townships in the vicinity of major industrial logistics centres, and set up or upgrade 4 Telescope Infrastructure.
The surge in capital budget considers a slew of mega contracts set to be signed next fiscal, including the one for 114 Rafale jets for the Indian Air Force.
The key to fighting a war successfully, or even launching it, is a clear objective. That’s an entirely political call. It isn’t emotional or purely military.
I would submit that there are three major flaws in your analysis.
Your main argument that the budget has not helped a substantial chunk of the middle class is as follows:
_“These projections define a middle-class Indian as someone earning Rs 1.09 lakh to Rs 6.46 lakh per year (2020-21 prices) or Rs 5 lakh to Rs 30 lakh annually per household. However, AY 2023-24 income tax data paints a different picture.
Of the 75.46 million (7.54 crore) salaried individuals who filed tax returns, 58.92 million (5.89 crore) earned less than Rs 7 lakh and were already exempt from tax. With the new Rs 12 lakh exemption, the number of tax-exempt salaried individuals will rise to 67.76 million (6.77 crore) in 2024-25.
Thus, the Budget’s “middle-class bonanza” will directly benefit only 88.4 lakh salaried individuals—a fraction of the 43 crore Indians classified as middle class. Given this, the actual boost to private consumption remains uncertain.”_
*The Flaws in Your Argument:*
1. _*Misinterpretation of Income Tax Data Trends*_
You rely on income tax return statistics from Assessment Year (AY) 2023-24, which represents Financial Year (FY) 2022-23, when the income was earned. You assume that the same income distribution pattern will persist in future years. However, incomes generally rise over time due to economic growth, inflation adjustments, and career progression. Many individuals currently earning below ₹7 lakh will likely move into the ₹7-12 lakh bracket in the coming years. Thus, relying on AY 2023-24 figures to estimate the number of beneficiaries under the new tax slabs understates the actual impact of the policy, as it applies three years later.
2. _*Incorrect Timing of the New ₹12 Lakh Exemption*_
The Finance Minister’s announcement of the ₹12 lakh tax exemption was introduced in the Union Budget 2025-26 and applies to Financial Year 2025-26, corresponding to Assessment Year 2026-27. This means taxpayers will benefit from this exemption on income earned between April 1, 2025, and March 31, 2026, when filing tax returns in AY 2026-27. However, you imply that the new exemption applies in 2024-25, which is incorrect. If you meant FY 2024-25 or AY 2025-26, both assumptions are mistaken.
3. _*Misleading Comparison Between Beneficiaries and Middle-Class Population*_
You claim that the budget’s tax relief will “directly benefit only 88.4 lakh salaried individuals—a fraction of the 43 crore Indians classified as middle class.” However, this comparison is misleading:
o The 88.4 lakh taxpayers benefiting from the tax cut do not represent individuals but households, covering 4.42 crore Indians (assuming an average household size of 5). This is a significant portion of the middle class.
o Furthermore, the 88.4 lakh figure is based on FY 2022-23 tax return statistics, which do not reflect the income shifts that will occur by FY 2025-26. By then, many more individuals will qualify for the exemption, making the actual number of beneficiaries much larger.
*Conclusion:*
Your analysis underestimates the impact of the tax exemption by relying on outdated data, misapplying the effective timeline, and making misleading numerical comparisons. The new exemption will benefit a far greater number of middle-class households than you suggest, and its positive impact on consumption and financial well-being will be more substantial than your argument acknowledges.
What a stupid article. First up, this was a long pending demand from the biggest income tax payer bracket, the middle class. That it would have some impact on consumption is moot. Also, where did the govt say that this is the only thing they will/are doing to revive the animal spirits in Indian economy?
I would submit that there are three major flaws in your analysis.
Your main argument that the budget has not helped a substantial chunk of the middle class is as follows:
_“These projections define a middle-class Indian as someone earning Rs 1.09 lakh to Rs 6.46 lakh per year (2020-21 prices) or Rs 5 lakh to Rs 30 lakh annually per household. However, AY 2023-24 income tax data paints a different picture.
Of the 75.46 million (7.54 crore) salaried individuals who filed tax returns, 58.92 million (5.89 crore) earned less than Rs 7 lakh and were already exempt from tax. With the new Rs 12 lakh exemption, the number of tax-exempt salaried individuals will rise to 67.76 million (6.77 crore) in 2024-25.
Thus, the Budget’s “middle-class bonanza” will directly benefit only 88.4 lakh salaried individuals—a fraction of the 43 crore Indians classified as middle class. Given this, the actual boost to private consumption remains uncertain.”_
*The Flaws in Your Argument:*
1. _*Misinterpretation of Income Tax Data Trends*_
You rely on income tax return statistics from Assessment Year (AY) 2023-24, which represents Financial Year (FY) 2022-23, when the income was earned. You assume that the same income distribution pattern will persist in future years. However, incomes generally rise over time due to economic growth, inflation adjustments, and career progression. Many individuals currently earning below ₹7 lakh will likely move into the ₹7-12 lakh bracket in the coming years. Thus, relying on AY 2023-24 figures to estimate the number of beneficiaries under the new tax slabs understates the actual impact of the policy, as it applies three years later.
2. _*Incorrect Timing of the New ₹12 Lakh Exemption*_
The Finance Minister’s announcement of the ₹12 lakh tax exemption was introduced in the Union Budget 2025-26 and applies to Financial Year 2025-26, corresponding to Assessment Year 2026-27. This means taxpayers will benefit from this exemption on income earned between April 1, 2025, and March 31, 2026, when filing tax returns in AY 2026-27. However, you imply that the new exemption applies in 2024-25, which is incorrect. If you meant FY 2024-25 or AY 2025-26, both assumptions are mistaken.
3. _*Misleading Comparison Between Beneficiaries and Middle-Class Population*_
You claim that the budget’s tax relief will “directly benefit only 88.4 lakh salaried individuals—a fraction of the 43 crore Indians classified as middle class.” However, this comparison is misleading:
o The 88.4 lakh taxpayers benefiting from the tax cut do not represent individuals but households, covering 4.42 crore Indians (assuming an average household size of 5). This is a significant portion of the middle class.
o Furthermore, the 88.4 lakh figure is based on FY 2022-23 tax return statistics, which do not reflect the income shifts that will occur by FY 2025-26. By then, many more individuals will qualify for the exemption, making the actual number of beneficiaries much larger.
*Conclusion:*
Your analysis underestimates the impact of the tax exemption by relying on outdated data, misapplying the effective timeline, and making misleading numerical comparisons. The new exemption will benefit a far greater number of middle-class households than you suggest, and its positive impact on consumption and financial well-being will be more substantial than your argument acknowledges.
Article feels incomplete , even this expert doesnt seem to know in detail what is to be done to improve demand .
What a stupid article. First up, this was a long pending demand from the biggest income tax payer bracket, the middle class. That it would have some impact on consumption is moot. Also, where did the govt say that this is the only thing they will/are doing to revive the animal spirits in Indian economy?