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Finance Minister Nirmala Sitharaman on Thursday said that rising personal income tax collections should not be interpreted as pressure on the middle class, arguing instead that they reflect growing incomes, formalisation of the economy, and expansion of India’s taxpayer base.
Replying to the debate on the Union Budget 2026–27 in the Rajya Sabha, Sitharaman said there is “no evidence of middle-class suppression”, adding that the middle class in India has grown significantly over the past decade.
Taxpayer base has more than doubled
One of the strongest indicators cited by the finance minister was the rapid expansion in the number of taxpayers.
Between FY14 and FY25:
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- The number of taxpayers increased from 5.26 crore to 12.13 crore
- This represents a compound annual growth rate (CAGR) of about 7.9%
- The taxpayer base has more than doubled in 11 years
According to Sitharaman, this reflects greater formalisation of incomes and more people entering the taxable income bracket, rather than increased tax burden.
“There are more people today with taxable income, and more income is visible in the formal sector,” she said.
Tax relief measures cited by the government
The finance minister also highlighted several policy measures aimed at easing the tax burden on individuals, particularly salaried taxpayers.
These include:
Tax-free income up to ₹12 lakh under the new tax regime
₹12.75 lakh tax-free threshold for salaried individuals
Higher standard deduction
Simplified tax filing under the new tax regime
She argued that these steps contradict the claim that the middle class is being squeezed financially.
Lower inflation and GST rationalisation
Sitharaman also pointed to lower inflation and GST rationalisation as factors supporting household finances.
According to her:
Inflation is at historically low levels
GST rationalisation has reduced the tax burden on many goods
Real incomes are rising alongside economic growth
She said these trends indicate improving purchasing power rather than financial stress for middle-class households.
Formalisation and welfare delivery
The finance minister also highlighted the government’s push toward direct benefit transfers (DBT) and better targeting of welfare spending.
Key figures shared in Parliament include:
₹48 lakh crore transferred directly to beneficiaries via DBT
₹4.31 lakh crore saved by plugging leakages
Only ₹37,000 crore remained unspent in social schemes over the last decade, compared with ₹94,000 crore during the previous regime
The broader economic message
Sitharaman said India is currently experiencing a rare macroeconomic balance, combining:
Strong GDP growth
Low inflation
Expanding taxpayer base
Increasing workforce mobility
She added that the Budget reflects the government’s focus on economic resilience, job creation, and long-term growth, including the proposed “Education to Employment and Enterprise” standing committee aimed at preparing youth for the services economy.