‘Cut taxes for them…’: Finance analyst on how India can grow faster in 2025 #IndiaFinance

Union Budget 2025: Amid the calls for tax relief to common taxpayers by relaxing the tax slabs in the upcoming Budget, finance analyst and Wisdom Hatch founder Akshat Shrivastava stated that the government should consider offering significant tax relief to middle-class taxpayers to boost the economy.

Highlighting the current world situation vis-a-vis India, Shrivastava noted that if the government decides to cut taxes for 2% direct taxpayers, that can accelerate consumption in India pushing its growth in 2025.

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“In India: – Inflation is moderate, Youth Unemployment is still high, Consumption is low… To accelerate consumption the west is already cutting IR. And, is likely to keep doing that for 2025. This will help India grow faster. What would truly turnaround the situation for us is: if we cut taxes for 2% direct tax payers. They are the backbone of our consumption driven economy. And, it is high time– that their life is made a little bit easier,” Shrivastava wrote on social media platform X.

On tax reforms, he added: “The deficit can be funded by strong political moves: eg. expand the tax base. Start with the rich farmers.”

It is not the first time that experts have spoken about the heavily taxed middle class. In recent years, there has been a significant increase in direct taxes, including income tax and corporate tax. It has been noted that the middle class has been shouldering the majority of the income tax burden, while corporate tax payments have decreased. The number of individual tax returns submitted has increased by over two fold, rising from 3.35 crore in 2013-14 to 7.54 crore in 2023-24.

Recent data on net direct tax revenues show a 15.88% increase to Rs 16.90 lakh crore between April 1, 2024, and January 12, 2025, surpassing the previous year’s collection.

As per calculations, for an individual earning Rs 10 lakh annually and saving 30% (the national savings rate), the estimated tax expenditure, considering an average consumption GST rate of 15%, could amount to approximately Rs. 1.6 lakh, which is equivalent to 16% of the total income. If the same individual saves only 15% of their income, the tax outgo would increase to 18%, and if there is no saving at all, the outgo would be 20% of their income.

Former Infosys CFO and Padma Shri awardee Mohandas Pai recently urged PM Narendra Modi and FM Nirmala Sitharaman to consider providing significant tax relief to middle-class taxpayers in the upcoming Budget 2025-26.

He noted that the middle class is facing huge financial strain and stressed on offering tax relief and simplifying the system.

Pai, in his post on social media platform X, wrote: “Very high growth in IT/CT collection for the third year. [It] will be higher than [the] budget again. Time for @FinMinIndia @nsitharaman to give relief, simplify, and reduce taxes on long-suffering middle-class taxpayers.”