Tuesday, April 13, 2021
Home Opinions Why it is unfair to call Modi government 'anti middle class'

Why it is unfair to call Modi government ‘anti middle class’

On 1 February, Union Finance Minister Arun Jaitley presented the Budget for the year 2018-19. Since it was the last full budget before the next Lok Sabha election, many people had expected that it would be populist. Salaried middle class had anticipated a significant relief in Income Tax. However, Jaitley did not give the expected relief to taxpayers.

Even the reintroduction of Standard Deduction failed to cheer taxpayers as its benefits got almost wiped out due to withdrawal of transport and medical allowance exemption. By the time Jaitley’s budget speech was over, social media and office corridors were rife with criticism for this “anti middle class” budget. A perception got created that Modi government had done nothing for the middle class in four years. Several people felt betrayed by the man behind whom they had rallied during 2014 election. Some even declared that they would not vote for BJP in the next election.

Being a middle class salaried taxpayer, I was intrigued by the severity of this criticism. Though Jaitley isn’t exactly a taxpayer-friendly FM, I never felt that honest taxpayers had suffered more under Modi government. So I decided to analyse income tax structures since 2013-14 to find out if middle class taxpayers were indeed worse off in the last four years. Below are my observations –

(Disclaimers:
1. I have assumed that middle class taxpayer = person having annual income between ₹5-50 lakh
2. I have deliberately ignored changes in IT rules which are applicable to women and/or senior citizens. The intent is to evaluate changes which are applicable to all middle class taxpayers.
3. Rebate under section 87A was increased from ₹2000 to ₹5000 in 2016-17, but was reduced to ₹2500 in 2017-18. For the sake of simplicity, I have ignored this net additional benefit of ₹500)

From the above table, it’s evident that for the same level of income, tax liability for middle class taxpayers has reduced across the board. Depending on the highest applicable tax slab and investment profile, a taxpayer can save up to ₹85,120 (minus 1% cess) as compared to 2013-14. A person having no investment and no loan is also saving ₹17,500 (minus 1% cess) in tax.

For people having home loans, the interest rates have come down by around 1.5% since 2014. This has resulted in significant saving. For instance, a person with a home loan of ₹75 lakh for a period of 30 years would be saving around ₹1 lakh per year due to reduced interest rate.

These are clear tangible benefits for middle class people. They should be looked at as a package of five years, not in isolation. Also, there are intangible benefits like more efficient use of tax money by reducing leakages through use of technology, improvements in urban infrastructure – Metro Rail, peripheral roads, improved highways, better power availability, etc. Prices of everyday use items have reduced after the introduction of GST. Government has managed to keep inflation in check.

On the issue of tax on Long Term Capital Gains, it’s a common practice around the world to tax LTCG. India had LTCG tax until 2005 when it was abolished based on Kelkar Committee report which said that the source of these gains (i.e. money invested) is already taxed, so taxing LTCG amounts to double-taxation. However it can be argued that this logic is flawed because under LTCG tax, only the gains are taxed, not the principle invested. While reintroducing LTCG tax,  Modi government has given a cushion of ₹1 lakh per year to protect small investors, and has proposed a flat rate of 10% which is reasonable. Also historical gains have been protected through grandfather clause.

In summary, it would be grossly unfair to accuse Modi government of being “anti middle class”. But perception management has never been this government’s strength, and I fear that BJP will have to pay electoral price for the wrong perception formed after the Budget. At the same time, taxpayers should realise that paying due taxes is a duty of citizens, and India’s Income Tax rates are fairly moderate for a developing, non-oil economy.

(With inputs from @muglikar_ )

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

Related Articles

Trending now

Japan to release treated water from Fukushima nuclear plant into the ocean: USA, IAEA support, China condemns

Japan has long delayed the decision to dispose of the wastewater from the Fukushima Daiichi nuclear plant over criticisms and safety concerns.

The direct fall-out of not implementing farm laws: Punjab Farmers say Arhtiyas asking for signed blank cheques for helping in crop procurement

Farmers across Punjab are being told by their arhtiyas to furnish "signed blank cheques" if they want to get their produce auctioned in the mandis

What happened in Chhabra after Hindu man was stabbed by Muslim men: Call for peace, attack on a Hindu the next day and more

On April 12, the administration extended curfew for one more day at Chhabra, Baran district in Rajasthan after the communal riot

Uttar Pradesh: Gyanvapi mosque management committee seeks a stay on ASI survey, Sunni board supports them

The Gyanvapi mosque management committee had filed an urgent petition in Allahabad High Court seeking a stay on ASI survey of Gyanvapi mosque complex.

Maharashtra: Viral video shows corpses of Covid patients wrapped in garbage bag and polythene being taken for cremation

One of the corpses had a black garbage bag taped over it while the face was wrapped in a polythene bag.

Pfizer wanted Brazil, Argentina to put military bases, Federal reserve as collateral: Why India kept Pfizer away and how the usual suspects are wrong

Pfizer has been accused of countries in Latin America of pledging their sovereign assets, military bases and financial reserves to protect itself from any adverse fallout of the vaccine

Recently Popular

Pfizer wanted Brazil, Argentina to put military bases, Federal reserve as collateral: Why India kept Pfizer away and how the usual suspects are wrong

Pfizer has been accused of countries in Latin America of pledging their sovereign assets, military bases and financial reserves to protect itself from any adverse fallout of the vaccine

After explosive Clubhouse confessions, Prashant Kishor starts building ground to blame only Mamata Banerjee if Bengal is lost: Here’s how

While trying to fire-fight fall-out from Clubhouse conversation, Prashant Kishor has set narrative to blame Mamata Banerjee and TMC for West Bengal loss

Attempts to draw false equivalence between the Kumbh Mela and Tablighi Jamaat congregation do not make sense: Here’s why

Attempts are being made to draw false equivalences between the Kumbh Mela and the Tablighi Jamaat congregation last year.

‘Victim card’: Netizens react as ‘comedian’ Munawar Faruqui vows to quit social media, political jokes

Munawar Faruqui has now announced that he would quit making political jokes and leave social media platforms.

Shops burnt, stones pelted on police in Baran, Rajasthan after 3 Muslim men stabbed one Kamal Singh: What we know so far

Shops burnt, police personnel injured, stone pelting, fire department vehicles attacked in Chhabra, Rajasthan.

India has to become a ‘Hindu Rashtra’, or it will be turned into an Islamic nation by 2030: Kerala MLA

"Can we let this nation (go) to any particular community? This needs to be discussed. Somebody has to speak up," PC George emphasised.
- Advertisement -

 

Connect with us

254,077FansLike
528,768FollowersFollow
24,200SubscribersSubscribe