As a country grows, the middle class too grows, both financially and in sheer numbers. In a way, the aspirations and the journey of the middle class represents the aspirations and the journey of a country. And so, any government in power must pay adequate attention to this section of the society.
It is the middle class that contributes greatly to the country through their role as honest taxpayers. However, their contribution needs to be recognised and their tax burden eased. For this, the Modi government took a historic decision. That there is zero tax liability on a net taxable annual income of Rs. 5 lakh now, is a huge boost to the savings of the middle class. However, this is not a one-off move. The Modi government has consistently been taking steps to reduce the tax burden on the taxpayers. Here is how union budget has put more money into the hands of the middle class through the years.
• Budget 2014-15 – Basic tax exemption limit was hiked from Rs 2 lakh to Rs 2.5 lakh for the individual taxpayers
• Budget 2017-18 – Tax rate for individuals in the tax bracket of Rs. 2.5 lakh to Rs. 5 lakhs was reduced to 5 per cent from 10 per cent, offering a saving of another Rs. 12,500
• Budget 2019-20 – No income tax on taxable income up to Rs. 5,00,000
In fact, now there is even more money in the pocket of the middle class since a person with a gross salary of as much as Rs 7 lakhs, with the right savings and investments, can effectively pay no tax.
the advent of GST has further added to the reduction of the indirect tax burden. As the indirect tax system has got streamlined and rationalised, most of the essential and daily usable items and services have also been made available at very affordable rates to the middle class. For example, there were steep taxes on eating out earlier, which is now just 5 per cent. Subsuming of a number of taxes and cesses, both state and central, has ensured that logistics and other costs come down, which benefit the end consumer.
Related to taxation, inflation was another big worry for the middle class, especially in the UPA era of double-digit inflation. In fact, in a way it is another indirect tax that directly impacts the middle class and the poor disproportionately. The reining in of inflation over the last five years, particularly for food prices, have been a relief for this class of people. If it was not for this, many families would have been spending around 35-40% more today on basic necessities.
All this can result in substantial savings for the middle class which they are free to deploy elsewhere for more aspirational pursuits.
Good education is key to building a great nation. After all, it is the quality of the human capital that makes or breaks the country. And the middle class forms an inalienable part of this human capital pool. The fall in interest rates on educational loans has ensured that more young minds pursue and fulfil their potential, lifting themselves and their families to the next level of prosperity.
Aspiration for a house of their own has been an evergreen middle class symbol. On housing loans too, interest rates have come down significantly between the UPA and the NDA eras, ensuring much lighten EMIs. Additionally, the credit linked subsidy scheme which further provides interest subvention is also available to middle income groups. This has helped more and more people are able to afford a home of their own. After all, it is in safe and secure homes that more dreams can bloom and come true.
The world over, wherever there has been development, middle class has been at the centre of it all. An empowered middle class makes an empowered nation. In other words, middle class plays an important role in nation-building itself. So, if the middle class is free from routine financial worries, or in more common language, free from food and shelter concerns, they can participate more constructively in building our country. The government of the day is ensuring just that.