Winning Bizness Desk

Mumbai. Over the past decade, Prime Minister Narendra Modi's government has reduced the income tax burden on middle-class taxpayers, especially those earning less than Rs 20 lakh annually. Meanwhile, individuals earning more than Rs 50 lakh per year have seen an increase in their tax obligations. Data from income tax filings reveals a significant rise in the number of high-income taxpayers, those earning over Rs 50 lakh annually. In 2013-14, there were about 1.85 lakh individuals in this bracket. By 2023-24, this figure surged fivefold to 9.39 lakh. Consequently, their tax payments increased from Rs 2.52 lakh on average in 2014 to around Rs 9.62 lakh in 2024. This increase in both high-income taxpayers and their contributions indicates a shift towards a more progressive tax structure.

High-Income Earners Now Contribute 76% of Tax Revenue

According to reports, taxpayers in the Rs 50 lakh and above income bracket now contribute a substantial 76% of the government’s total income tax revenue. This redistribution has benefited the middle class by easing their tax burden. Efforts by the Modi government, including anti-tax evasion measures and legislation targeting black money, have been instrumental in raising compliance among high earners. The increase in high-income tax contributions can also be attributed to stricter compliance and the government’s focus on cracking down on tax evasion. This has led to an uptick in income tax return filings, with a record 8 crore returns filed in the assessment year 2024-25. Of these, 74% were submitted under the new tax regime.

Tax Relief for Lower-Income Groups

When the Modi government came to power, taxpayers with an annual income of up to Rs 2 lakh were required to pay income tax. However, with the introduction of deductions and exemptions over the years, individuals earning up to Rs 7 lakh annually are now exempt from income tax. This has provided a significant relief for middle-class families. Additionally, the share of taxes paid by individuals earning less than Rs 10 lakh per year has declined from 10.1% of total tax collections in 2014 to 6.22% in 2024. For taxpayers with an income range between Rs 2.5 lakh and Rs 7 lakh, the tax liability for the financial year 2023-24 stood at around Rs 43,000, or approximately 4-5% of their total income, which is among the lowest in emerging economies.

A Boost for Middle-Class Savings and Spending Power

The tax cuts and exemptions for middle-income groups have left them with more disposable income, which has been essential for supporting household budgets amidst inflation. These changes also help in promoting consumer spending, which is vital for economic growth. Through policies that lighten the tax load on middle-income earners and target high-income groups, the Modi government has attempted to make the tax system fairer and more growth-oriented. The focus on easing the tax burden for middle-class households aligns with a broader objective to support and strengthen this essential demographic within India’s economy.