Union Budget 2025: Tax Cuts for Middle Class to Boost Spending and Growth

The Indian government, led by Prime Minister Narendra Modi, has announced a new budget that aims to help the middle class, boost the economy, and support key sectors like farming and manufacturing.

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Big Tax Relief for Middle-Class

Finance Minister Nirmala Sitharaman, while presenting the budget on Saturday, announced that people earning up to ₹1.28 million ($14,800) per year will no longer have to pay income tax. Earlier, the limit was ₹700,000, so this is a big relief for taxpayers.

The government has also lowered tax rates for people earning above this limit to increase household savings and spending. This move is expected to help the economy grow but will cost the government ₹1 trillion ($11.6 billion) in lost tax revenue.

“This tax cut will leave more money in people’s hands, helping them save and spend more, which will boost the economy,” said Sitharaman.

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India’s Economic Challenges

India, the world’s most populated country, is expected to grow at its slowest pace in four years due to weak urban demand, low private investment, and rising food prices.

With an average income of $2,700 per person, about one-third of India’s 1.4 billion people are considered middle class. Economists believe that this tax cut will help them manage rising costs and encourage spending.

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Support for Farmers, Gig Workers, and Startups

The budget also includes benefits for farmers, gig workers, and young entrepreneurs:

Support for Farmers: A new program will promote high-yield crops like pulses and cotton, benefiting 17 million farmers. The limit for farm loans has been raised from $3,460 to $5,767.

Help for Gig Workers: India’s growing gig workforce, expected to reach 23 million by 2030, will now be registered so they can get better access to healthcare and welfare programs.

Boost for Startups: A new fund will be launched to support startups and encourage innovation in partnership with private companies.

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India’s Push for Clean Energy

Sitharaman also announced a Nuclear Energy Mission, which aims to develop at least 100GW of nuclear power by 2047 as part of India’s transition to clean energy.

This budget focuses on tax relief, economic growth, and supporting key industries. While it is expected to benefit the middle class and boost spending, the government will need to carefully manage revenue losses to keep the economy strong.

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