Income Tax Announcement Is Okay, But What India Needed Is…
The Union Budget’s announcement of no income tax liability up to ₹12 lakh under the new regime has sparked celebrations among taxpayers. But considering that only 6.68% of Indians pay direct tax, this excitement seems misplaced. While tax relief benefits those in the bracket, it does little to address the broader economic concerns—rising inflation, job creation, and the depreciating rupee. India needs structural reforms to boost employment and reduce living costs, rather than focusing solely on tax concessions.
The revised tax slabs provide significant benefits to middle and upper-income groups. The new structure ensures no tax on income up to ₹4 lakh, 5% on ₹4-8 lakh, 10% on ₹8-12 lakh, 15% on ₹12-16 lakh, 20% on ₹16-20 lakh, 25% on ₹20-24 lakh, and 30% on income above ₹24 lakh. A taxpayer earning ₹12 lakh annually saves ₹80,000, while those earning ₹25 lakh save ₹1.1 lakh. Additionally, the rationalisation of TDS and tax exemption on two self-occupied properties aim to ease compliance. However, these changes only impact a small segment of the population, leaving out the vast majority who struggle with high living costs and limited job opportunities.
India’s economic growth is projected at 6.3% to 6.8% in FY26, with stable private consumption and fiscal consolidation. But food inflation has surged from 7.5% to 8.4% in FY25, driven by rising prices of vegetables and pulses. This inflationary pressure erodes real incomes, making even tax savings less meaningful for those struggling with everyday expenses. Moreover, the rupee hit an all-time low at 86.65 per dollar, making it the worst-performing Asian currency in January. The depreciation is fueled by global economic trends, trade concerns, and capital outflows. A weaker rupee increases import costs, indirectly reducing purchasing power for all citizens, regardless of tax relief.
The Economic Survey 2024-25 underscores the urgency of job creation, stating that India must generate 7.85 million non-farm jobs annually until 2030. The government has introduced initiatives like the National Manufacturing Mission to create a future-ready workforce, the PM Dhan Dhanya Krishi Yojana to boost agricultural productivity in 100 districts, and Focus Product Schemes for labour-intensive sectors like footwear, leather, and toys, aiming to create 22 lakh jobs and drive exports. For MSMEs, investment limits have increased 2.5 times, turnover caps doubled, and credit guarantee cover expanded to ₹10 crore, unlocking ₹1.5 lakh crore in additional credit. The Micro Enterprise Credit Card will also support 10 lakh small businesses in its first year. Yet, how effectively these policies translate into job creation remains to be seen. Past initiatives have often fallen short in execution. The key challenge is bridging the gap between policy intent and real employment impact.
While income tax relief is welcome, it is not the game-changer India needs. The focus should be on reducing inflation, stabilising the rupee, and creating jobs. The government’s employment-focused schemes are steps in the right direction, but their success will depend on execution, investment flow, and long-term economic stability. Instead of celebrating tax exemptions, the real question remains—how do we ensure more Indians have stable incomes, not just tax savings?
