How Have Tax Reforms and Pension Schemes Benefited India’s Middle Class Over the Last 11 Years?

New Delhi, June 5 (NationPress): Over the past 11 years, the Government has initiated consistent reforms aimed at enhancing the quality of life and dignity of the middle class. These reforms include tax relief measures that allow families to retain more of their income and pension schemes that offer financial security in later years, as stated in an official announcement.

The administration has worked to eliminate bureaucratic hurdles, streamline regulations, and improve everyday processes. Whether it’s about filing taxes, purchasing homes, commuting, or affording medications, the systems have become significantly more user-friendly.

These changes are not isolated but represent a coherent strategy addressing the genuine needs of everyday citizens. The government has acknowledged the diligent efforts of the middle class and recognized them as essential contributors to India’s economic growth, the statement highlighted.

From decreasing income tax rates to simplifying tax returns, every initiative has been directed towards empowering citizens to retain a greater share of their earnings, the statement clarified.

The latest tax reforms, particularly those outlined in the Union Budget for 2025–26, showcase the Government’s confidence in the middle class as a cornerstone of national progress.

Whether it’s increasing the income limit for tax exemption, introducing a simplified tax framework, or facilitating easier return filing, the commitment remains unwavering.

What is particularly noteworthy is not just the magnitude of the reforms but the inherent sense of justice and acknowledgment they represent for honest, hardworking taxpayers, as the statement emphasized.

Throughout the last 11 years, the income tax policy has consistently provided substantial relief.

The Government has elevated exemption thresholds, introduced standard deductions, launched a simplified tax framework in 2020, and minimized paperwork. Collectively, these measures have significantly eased the burden on taxpayers, the statement explained.

In the Union Budget for 2025–26, another significant alteration was revealed. Individuals earning up to ₹12 lakh per year are now exempt from income tax, excluding certain incomes like capital gains. With a standard deduction of ₹75,000, even those earning ₹12.75 lakh will not incur any tax.

The standard deduction automatically lowers taxable income by a fixed amount, alleviating the tax burden on salaried individuals without requiring multiple claims or detailed documentation.

This reform is poised to benefit millions of salaried individuals, demonstrating a profound understanding of middle-class requirements, even as the Government sacrifices nearly ₹1 lakh crore in revenue.

To streamline tax compliance, individual taxpayers now receive pre-filled Income Tax Returns, incorporating details such as salary income, bank interest, dividends, and more.

This ease of compliance is evident in the surge of individual ITR submissions, which rose from 3.91 crore in FY 2013–14 to 9.19 crore in FY 2024–25, illustrating that increasing numbers of people find it simpler and beneficial to adhere to tax regulations.

Before 2014, escalating prices consistently pressured middle-class households. From 2009–10 to 2013–14, inflation remained in double digits. Basic necessities like food and fuel became increasingly unaffordable, straining family budgets and making saving seem impossible.

Over the decade from 2004–05 to 2013–14, average annual inflation was a high 8.2 percent. This lengthy period of price volatility complicated daily life and made future planning uncertain.

Inflation has decreased to an average of 5 percent between 2015–16 and 2024–25, which has eased living costs for the populace. Stable prices have provided families with some much-needed relief.

Essentials have become more affordable, making it easier to manage monthly expenditures. This transformation resulted from effective policy implementation, strong coordination with the Reserve Bank, and improved supply-side management.

The middle class, long burdened by rising costs, has finally found respite and regained confidence in the economic landscape.

In a significant initiative to bolster social security for government employees and their families, the Union Cabinet approved the Unified Pension Scheme (UPS) on August 24, 2024.

This scheme guarantees a pension amounting to 50 percent of the average basic salary drawn during the last 12 months before retirement, applicable to employees with a minimum of 25 years of service. For those with shorter tenures, the pension will be calculated proportionately, with a minimum qualifying period of 10 years, the statement concluded.