Middle-Class Woes: Understanding India’s Budget and Its Impact on Taxpayers
Introduction
For middle-class families in India, the annual Union Budget is a double-edged sword. On February 1st, Finance Minister Nirmala Sitharaman will present the next budget, leaving many anxious about potential changes in taxes. From revised GST rates to rising living costs, it’s becoming clear that the middle class bears a disproportionate tax burden. Let’s dive into the details to understand why this is happening and what the upcoming budget might hold.
The GST Conundrum
The Goods and Services Tax (GST) has become an unavoidable expense in daily life. Recent updates highlight the disparity in taxation:
- Buying a used car now attracts GST.
- Regular popcorn is taxed at 5%, while chocolate-coated popcorn is taxed at 18%.
- Books are tax-free, but notebooks for studying incur a 12% GST.
For middle-class households, these taxes quickly add up, leaving less disposable income for essentials or savings.
The Corporate vs. Individual Tax Divide
There’s a common misconception that large corporations shoulder the bulk of India’s tax burden. However, data reveals a different story:
- In 2022-23, individuals contributed ₹11.56 lakh crore in taxes, while corporate taxes stood at ₹10.48 lakh crore.
- In 2019, the government reduced corporate taxes to prevent companies from moving abroad, hoping the savings would boost employee wages. Unfortunately, salary increments across sectors have barely kept pace with inflation.
For instance, the average salary growth in retail between 2019 and 2023 was a mere 3.7% CAGR, and the IT sector showed only 4% CAGR. This sluggish growth leaves the middle class struggling to meet rising expenses.
Inflation: The Silent Culprit
While official inflation metrics often understate reality, costs in critical areas like healthcare and education have soared:
- Routine medical procedures, such as kidney stone surgeries, are exponentially more expensive than a decade ago.
- Education costs, including tuition and school fees, continue to climb steeply, burdening families further.
Air Quality, Safety, and Infrastructure: Failing Basics
The government’s responsibility isn’t limited to tax collection; it’s also about ensuring basic needs like clean air, safe environments, and accessible healthcare. However:
- In cities like Delhi, air quality often exceeds hazardous levels (AQI >300), exposing families to severe health risks.
- Public hospitals and safety standards, especially for women, remain inadequate, leading people to rely on costly private alternatives.
Income Tax in Global Context
India’s income tax brackets place an unfair burden on the middle class:
- Earnings above ₹15 lakh face a 30% tax rate, significantly lower than global counterparts like the US, where higher rates apply to significantly higher incomes.
- Only 1.6% of Indians pay income tax, underscoring the need for broader job creation and income growth rather than squeezing the existing taxpayers.
The Middle-Class Paradox
The middle class faces unique challenges:
- No Welfare Benefits: Unlike the economically weaker sections (EWS), the middle class doesn’t qualify for subsidies or quotas in housing, education, or healthcare.
- Tax Burden: Unlike the wealthy, who often relocate or exploit tax loopholes, middle-class taxpayers have limited options to reduce their liabilities.
The Way Forward
India’s growth depends on empowering its middle class. Key measures could include:
- Reducing GST on essential items.
- Offering better public services like education, healthcare, and clean air.
- Encouraging corporate accountability to ensure salary growth aligns with inflation.
- Expanding the tax base by creating more jobs and incentivizing compliance.
Conclusion
The middle class—the backbone of India’s economy—deserves better. It’s time to raise awareness and demand policies that foster growth, fairness, and sustainability. What’s your opinion on India’s tax structure? Share your thoughts in the comments, and let’s discuss how we can build a more equitable future.
