Union Budget 2025-26: Experts Say, Enhanced Tax Exemption Expected to Strengthen Middle-Class Spending and Savings

Agartala, Feb 01, 2025, By Our Correspondent ( with inputs from agencies)91

Union Finance Minister Nirmala Sitharaman has announced a significant revision in the income tax structure under the new tax regime, proposing an increase in the minimum tax exemption limit from ₹7 lakh to ₹12 lakh. Additionally, salaried individuals will benefit from a ₹75,000 standard deduction. Economists believe this move will provide substantial financial relief to the middle class, fostering both increased spending and higher savings.

According to former Chief Economic Advisor to the Government of India, Ashok Kumar Lahiri, this proposal will leave more surplus income in the hands of taxpayers, allowing them greater financial flexibility. This additional disposable income is expected to drive consumer spending, stimulate market demand, and contribute to overall economic expansion.

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“At the same time, it would be incorrect to assume that the additional income will only encourage spending at the cost of savings. In reality, this measure provides middle-class taxpayers with the opportunity to bolster their savings while simultaneously increasing their expenditure. In essence, the proposal is designed to accelerate both consumption and savings in a balanced manner,” said Lahiri, who is currently a BJP legislator in the West Bengal Assembly.

Economist Probir Kumar Mukhopadhyay emphasized that this tax revision signifies a strategic shift towards demand generation, which had previously taken a backseat to supply-side policies. “For any economic policy to be truly effective, both supply-side and demand-side considerations must be equally prioritized. While individual taxpayers will determine how they allocate their additional income between spending and saving, middle-class households generally aim for a well-balanced approach between the two,” Mukhopadhyay explained.

Economists have also welcomed other tax-related revisions, particularly the rationalization of Tax Deducted at Source (TDS) for senior citizens. The exemption limit has been doubled from ₹50,000 to ₹1,00,000, a move expected to provide considerable relief to retirees who largely depend on interest income. “This budget, for the first time in many years, genuinely prioritizes the concerns of the middle class,” Mukhopadhyay added.

With these measures, the Union Budget 2025-26 is being seen as a landmark reform, not only reducing the tax burden but also fostering stronger financial security and increased economic activity among India’s middle-class population.