The Union Budget for 2025-26, presented by Finance Minister Nirmala Sitharaman, appears to bring smiles to taxpayers, investors, and the middle class. Through tax cuts and financial incentives, the Finance Minister aims to boost the purchasing power of the middle class, thereby increasing demand and driving economic growth. Under the new tax regime, the budget has made income up to ₹12 lakh tax-free, providing significant relief to taxpayers. Additionally, the Foreign Direct Investment (FDI) limit in the insurance sector has been raised from 74% to 100%, allowing companies to expand and benefit taxpayers and the middle class through reduced premiums.

Undoubtedly, after the COVID-19 pandemic, there has been a growing demand for relief for the middle class. While the government has made numerous announcements for the poor and corporate sector in recent years, the middle class, which contributes significantly to tax revenue, had often been overlooked. There is no doubt that in previous budgets, the concerns of the middle class were not given enough attention. The tax burden on this class has been disproportionately high compared to the services it receives in return. Prime Minister Modi also signaled relief for the middle class at the beginning of the budget session. Moreover, in the economic review of 2024-25, the Finance Minister acknowledged the real income decline of salaried and self-employed middle-class people. The Finance Minister is now taking steps to boost private consumption, which is expected to enhance economic growth.

This budget aims to resolve long-pending financial grievances of the middle class, accelerate economic growth, and create a favorable economic cycle by offering suitable tax relief. By reducing the tax burden on the middle class, consumption is expected to increase, leading to higher GST collections and an expanded tax base. A stronger middle class will be the foundation for realizing India's high-growth vision.

It is noteworthy that Finance Minister Sitharaman has ensured that tax collection mechanisms are robust, allowing relief measures for the middle class. Over the past decade, the number of income tax filers and tax receipts have seen significant growth. Direct tax collection, including income tax, reached ₹16 lakh crore from April to December 2024, which is over 16% higher compared to the same period last year. In this context, the budget offers tax cuts and simplifies the tax structure to encourage more spending and savings among taxpayers, small investors, and the middle class.

Under the new tax regime, the Finance Minister introduced significant changes in the income tax slabs, ensuring that more taxpayers are encouraged to adopt the new system. Income up to ₹12 lakh will be tax-free, and taxpayers across various income levels will have the opportunity to save more. Additionally, the budget raises the standard deduction limit for senior citizens from ₹50,000 to ₹1 lakh and provides a ₹75,000 tax benefit to salaried individuals.

Although tax reforms have led to impressive growth in income tax collections, there is still significant potential for increasing the tax base. The Finance Minister has announced plans for a new tax bill aimed at making the Income Tax Act of 1961 easier and more effective, tailored to current needs. The new law will remove unnecessary and outdated provisions, reduce tax disputes, and simplify compliance for taxpayers.

In conclusion, the 2025-26 Union Budget brings significant tax relief and incentives for taxpayers, investors, and the middle class, boosting their purchasing power, consumption, and economic activity. This budget will contribute to increased consumption, higher growth rates, and a more dynamic economy.