Finally, I-T cuts
For years, India’s middle class has been caught in a financial squeeze — rising prices, stagnant wages and a tax burden that rarely felt fair. With Union Budget 2025, the Modi government has finally offered substantial tax relief by raising the exemption limit and lowering tax rates. Now, individuals earning up to Rs 12 lakh pay no tax. The revised structure increases disposable income, potentially boosting consumer spending while easing inflation. The expected rise in consumption could counterbalance the reduced tax revenue. For salaried individuals, the simplified regime is a welcome departure from the complexity of deductions and compliance. Senior citizens stand to gain with limit for tax deductions on interest income doubled to Rs 1 lakh annually. This will provide meaningful relief to the retirees relying on fixed-income sources. And, those dependent on rental income will gain from the increased TDS threshold, now raised to Rs 6 lakh annually, offering greater financial flexibility.
However, the fine print presents concerns as the changes come with trade-offs. While lower rates seem beneficial, the removal of key deductions — on EPF, PPF, insurance and home loans — may erode the common man’s actual savings. A deeper concern is the potential decline in long-term savings. The new regime discourages investments in PFs and social security schemes. While taxpayers enjoy greater flexibility, the absence of forced savings could weaken their financial security in the long run. Additionally, the upcoming Eighth Pay Commission could push government salaries higher, placing employees in higher tax brackets and offsetting relief.
For now, middle-class taxpayers can breathe easier. But real economic relief requires more than tax cuts — it demands sustained income growth, inflation control and an expanded tax base. Plus, a social security net for the retirees — at present, it is almost nil for the private sector. Without these, financial pressures will persist despite the temporary relief.
