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 –

- Ad - - article resumes -

(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_ )

Help Opindia Reach Every Indian. Share This Post
We need your support to survive in the media industry. Please consider paying us for the content we produce:

To know more about these payments, please click here.


Big Story

While the date of the recording is not clear, it can be inferred from above conversation that it took place sometime in July.

2019 World Cup Is Here!

Catch the latest on Cricket World Cup as it unfolds, special coverage by Opindia

To Advertise on Opindia.com Click here

Barkha Dutt’s strange coincidences with a Kashmiri who wished death upon PM Modi and Amit Shah

Idrees ul Haq, with whom Barkha Dutt had a series of ‘coincidences’ is a known separatist sympathiser

Army veteran Surendra Poonia receives threats from Pakistan, files online complaint with cyber crime portal

Major Poonia shared screenshots of the threats he has been receiving as well as screenshot of message which said how an unknown number had threatened to character assassinate him and malign him.

Deplorable ‘journalists’ further Pakistan propaganda and undermine India: Why should their patriotism not be questioned

Indian 'journalists' and 'intellectuals' have taken up the mantle of peddling the Pakistan narrative on Kashmir it appears.
Shah Faesal was reportedly planning to approach ICJ over India’s decision to abrogate Article 370

IAS-turned-politician Shah Faesal was travelling to file case against India in the ICJ over Kashmir issue: Report

Shah Faesal was nabbed at the New Delhi International Airport on August 14 when he was trying to leave the country, reportedly, to Turkey

Here is why Shobhaa De could be first in a long list to be exposed by Pakistan

India’s stand on abrogation of Article 370 and 35A and dilution of Jammu and Kashmir from a state to a Union Territory has dropped the baby of pretence.

Purported email screenshots of Kavita Krishnan’s team show them discussing use of retired judges and ex-military officers for Kashmir propaganda

Purported screenshots of internal emails of urban naxals are being circulated on social media

After the abrogation of Article 370, Pakistan Minister expresses angst over Rahul Gandhi not winning 2019 elections

After abrogation of Article 370 by the Modi government, Congress and Pakistan seem to have found an ideological soulmate in each other
Shehla Rashid bats for Armed insurgency in Kashmir

Career-protester-turned-politician Shehla Rashid downplays terrorism in Kashmir, calls legitimate action by India ‘state terrorism’ instead

According to Shehla Rashid, India has been inflicting atrocities on Kashmiris since 1953
PM Modi's debut on Man vs Wild becomes most viewed show worldwide with 3.6 billion impressions, leaving Super Bowl behind

PM Modi’s debut on Man vs Wild becomes most trending show worldwide with 3.6 billion impressions, leaving Super Bowl behind

The appearance of PM Modi on Discovery’s ‘Man vs Wild’ show with survivalist and adventurer Bear Grylls has garnered 3.6 billion impressions and counting.
Syed Akbaruddin addressed the media yesterday at the UN, affirmed that any decisions regarding Jammu and Kashmir is India's internal matter and if Pakistan wants any talks with India, it has to stop promoting terrorism first.

We do not need international busybodies to tell us how to run our lives, Pakistan using Jihad to promote violence: Syed Akbaruddin

"India is a vibrant democracy, we do not need international busybodies to tell us how to run our lives", India's ambassador to the UN Syed Akbaruddin.
Subscribe to Day's Top Stories
[newsletter_form type="minimal"]
- Advertisment -

Latest articles

Connect with us

180,671FansLike
170,109FollowersFollow
89,077SubscribersSubscribe
Help Opindia Reach Every Indian. Share This Post