I read Budget documents so that normal people do not have to, and occasionally the habit rewards me. The personal-income-tax changes announced in the 2025 Union Budget were one such occasion. Under the new regime, the rebate made ordinary income up to ₹12 lakh effectively free of tax, while salaried taxpayers could go a little higher after the standard deduction. The revised slabs are set out in the government’s own Budget highlights, not in a party spokesperson’s triumphant graphic. My view is straightforward: this was a substantial middle-class reform, and the refusal of many opposition voices to acknowledge it showed how stale our tax politics has become. For years, every Budget prompted the same ritual. Television anchors asked what the middle class received; Congress politicians declared that salaried Indians had been ignored; and tax experts produced tables requiring a magnifying glass. When the government finally delivered conspicuous relief, critics abruptly discovered that tax cuts were insufficient because public spending also mattered. Of course public spending matters. A government can build roads and still stop treating every modest pay rise as an invitation to confiscate another slice of household breathing room.
A reform bigger than the annual calculator
The most useful change is not merely the amount saved in one financial year. It is the direction of travel. India’s tax code has long rewarded the ability to navigate exemptions rather than the simple virtues of earning, saving and filing honestly. The old regime turned tax planning into a scavenger hunt: rent receipts, insurance premiums, approved investments, loan-interest certificates and a shoebox of proofs. Those deductions often encouraged good behaviour, but they also favoured citizens with formal salaries, financial advice and sufficient surplus income to lock money away. A cleaner slab structure says something healthier: the state will first decide a reasonable tax burden and then let households decide what to do with their remaining income. That is not an assault on savings. It is an admission that a young renter in Bengaluru, a family paying school fees in Jaipur and an elderly couple managing medical bills in Kochi do not have identical financial lives. The explanatory memorandum to the Finance Bill places the changes within a wider programme of simplification and rationalisation. Those dreary words matter. A tax system should be boring enough that an honest person can understand it without hiring an interpreter.
Congress-era nostalgia is particularly unhelpful here. The old political bargain treated exemptions as gifts bestowed by a benevolent finance minister. Each deduction created a constituency, each constituency demanded preservation, and the resulting thicket could then be advertised as social policy. But a deduction is valuable only to someone who owes enough tax and has enough spare cash to claim it. The poorest citizen receives nothing from a deduction for a financial product she cannot buy. The lower-middle-class taxpayer receives less than the affluent professional who can use the allowance fully. A broad rebate is not perfect redistribution, yet it is more candid than pretending that a maze of conditional concessions is compassion. It also reduces the premium on paperwork. That matters in a country where an intimidating notice, a mismatched form or a delayed refund can impose a larger psychological cost than the final tax bill. I give the Modi government credit for steadily pushing the new regime toward viability rather than abandoning it when taxpayers initially preferred familiar deductions.
The fair counterargument
The strongest objection is not that the relief is imaginary. It is that India still has a narrow personal-income-tax base and substantial demands on public money. If more people owe no tax, the burden can fall on indirect taxes, which are less sensitive to ability to pay. That is a serious concern, and cheerleaders should not wave it away. A shopkeeper buying fuel and a wealthy executive buying fuel face the same levy at the pump. Nor should the government behave as though salaried taxpayers are the only middle class. Many self-employed Indians encounter advance-tax rules, GST compliance, professional expenses and uncertain cash flow. Their frustration cannot be resolved by one attractive slab chart. Yet this objection strengthens the case for administrative reform; it does not invalidate reasonable relief. A government should broaden the base by improving formalisation, information systems and enforcement against deliberate evasion, not by keeping modest formal incomes inside the net merely because they are easiest to collect from. Convenience for the tax department is not a moral theory.
I would also resist the claim that every rupee forgone must be described as a handout. Citizens earn the income before the government taxes it. Allowing a nurse, engineer or schoolteacher to retain more of that income is not equivalent to transferring public money to a favoured corporation. The distinction matters because India’s commentary class often treats tax relief as fiscally suspect only when ordinary earners receive it. Nobody speaks with similar solemnity about the accumulated cost of badly targeted subsidies, leak-prone schemes or public enterprises kept alive by political sentiment. Fiscal prudence requires choosing among claims, not sanctifying the existing tax burden. If stronger consumption follows, businesses collect revenue and governments recover some receipts through other channels. I would not promise a magical multiplier, but neither would I assume that household money vanishes when North Block stops collecting it.
Where the government still owes taxpayers more
My praise comes with conditions. Simplified rates are only one half of a civilised tax system. The other half is predictable administration. Taxpayers still confront confusing communications, portal problems, slow dispute resolution and anxiety over automated demands. The government has improved digital filing dramatically, but digitising a bad interaction can merely make the bad interaction arrive faster. Notices should be written in intelligible language, mismatches should be explained precisely, and minor good-faith errors should not trigger a bureaucratic opera. Refund timelines need credibility. Faceless assessment should mean freedom from discretionary harassment, not faceless helplessness when a system makes a mistake. The state possesses far more data and expertise than an individual filer; it should therefore carry a greater obligation to be clear. A cleaner statute accompanied by opaque enforcement is only half a reform.
There is also a political temptation to keep raising the rebate before elections while postponing harder structural choices. That would be a mistake. Rates cannot bear the entire burden of reform. India needs fewer disputes over classification, greater stability in capital-gains rules, sensible treatment of small businesses and faster closure of old litigation. It must also improve municipal finance, because citizens who pay income tax often pay privately again for water, security, transport and reliable power. The honest taxpayer’s resentment is not created solely by the amount deducted. It comes from seeing weak services and selective enforcement while being told that compliance is a patriotic duty. The government has earned goodwill with the new regime; it should spend that goodwill on making the machinery less adversarial.
Why the opposition’s reflex failed
The opposition could have welcomed the relief and then pressed the government on compliance, indirect taxes and expenditure quality. That would have been useful politics. Instead, much of the response followed the familiar script that nothing counts unless it resembles a Congress manifesto. Some critics changed the subject to unemployment within minutes, as if a finance minister were forbidden to improve taxation until every economic problem had disappeared. Employment is plainly the larger challenge, but a government can pursue manufacturing, infrastructure, skilling and tax reform simultaneously. Refusing to recognise one improvement does not make the critic rigorous; it makes him predictable. Voters notice when parties appear irritated by good news because it arrived under the wrong administration.
I do not regard the new regime as the final tax settlement. I regard it as the first version that deserves its name. It offers a clearer bargain: fewer exemptions, lower friction and a lighter burden on ordinary formal income. The government should now make that bargain durable rather than turning slabs into an annual suspense film. Publish a medium-term road map, simplify communication, resolve disputes quickly and broaden compliance without bullying the already compliant. If it does those things, this reform will outlast the Budget-day applause. And if Congress wishes to oppose it, it should offer something more persuasive than nostalgia for a code whose chief achievement was teaching generations of Indians to organise their finances around Section numbers. I will take a system that trusts households with their own money over one that makes them perform approved virtue for a deduction. That is not ideological extravagance. It is administrative adulthood.
