Finance Minister Nirmala Sitharaman has announced significant income tax relief for the middle class in Budget 2025. Under the new tax regime, annual income up to ₹12 lakh will now be tax-free, providing direct benefits to millions of taxpayers. The government claims that this move will enhance the purchasing power of the middle class, thereby boosting consumption and demand in the economy.
The government believes that raising the income tax exemption limit will leave more money in the hands of the middle class, leading to increased consumption. This will not only improve their quality of life but also stimulate demand in the economy, which is a positive indicator for economic growth. Additionally, the budget has increased capital expenditure by 10% to ₹11.2 lakh crore, which will aid infrastructure development and job creation.
However, some budget announcements have been questioned by critics. Senior journalist Ravish Kumar, in one of his programs, raised concerns about whether this income tax relief will genuinely benefit the middle class or if it is merely an election strategy. He also pointed out that the budget does not allocate sufficient funds to crucial sectors like health and education.
Political analyst Yogendra Yadav highlighted a reduction in the agricultural budget. He noted that in 2019-20, the agriculture budget was 5.95% of GDP, but by 2025-26, it has shrunk to just 3.06%. He believes that while the budget contains rhetoric for farmers, it lacks financial support.
Aam Aadmi Party leader Raghav Chadha also criticized the budget, stating that the government has presented only superficial solutions for serious economic problems. He compared the budget to “applying a band-aid on a bullet wound.”
Significant changes have also been made concerning capital gains tax in Budget 2025. If an individual earns short-term capital gains from the stock market, mutual funds, real estate, or other assets, it will now be taxed at a 20% rate. Long-term capital gains (LTCG) will be taxed at 12.5% if they exceed ₹1 lakh.
Critics argue that these changes in capital gains tax will place an additional burden on investors, potentially slowing down investment activity. Experts warn that this could negatively impact middle-class investors who rely on stock market investments for wealth generation.
Economic experts believe that while Budget 2025 offers income tax relief to the middle class, which will help increase their purchasing power, the changes in capital gains tax have raised concerns among investors. Renowned economists Arvind Subramanian and Raghuram Rajan argue that if the government wants to foster more stable economic growth, it should focus on measures that promote investment and avoid raising taxes on investments.
The budget’s lack of sufficient allocation for critical sectors such as agriculture, health, and education has raised concerns from critics. The government may need to consider policy reforms to address these criticisms.
(Rajeev Khare, Bureau Chief, Chhattisgarh)
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