The BJP government in the last 10 years has tried to exempt the lower middle-class from paying income tax, with shifting the focus to high-income earners
Tax reforms by Prime Minister Narendra Modi-led Bharatiya Janata Party (BJP) government in the last 10 years eased the burden on middle-class earners with incomes below Rs 20 lakh. Meanwhile, improved, non-evasive enforcement led to a substantial rise in tax returns from individuals earning over Rs 50 lakh, according to official sources.
In 2024, individuals earning between Rs 10 lakh and Rs 15 lakh face an average tax liability of Rs 1.1 lakh, a significant decrease from the Rs 2.3 lakh under the United Progressive Alliance (UPA) government. The reduction is even greater when compared to the Rs 4.2 lakh when adjusted for inflation.
Similarly, those earning between Rs 15 lakh and Rs 20 lakh now face an average tax liability of Rs 1.7 lakh, sharply reduced from Rs 4.1 lakh under the UPA and Rs 7.2 lakh after inflation adjustment.
“Adjusted to inflation, there is almost a 60 per cent decrease in tax liability for those earning between 10 and 20 lakh, with 40 per cent actual,” says a senior government official, who wish not to be identified. “UPA imposed an unfair tax burden on the middle class. In 2014, all those earning above 2 lakh had to pay tax.”
Notably, the Modi government has tried to exempt the lower middle-class from paying income tax. Sources say that the percentage of income tax collection from taxpayers earning less than Rs 10 lakh reduced from 10.17 per cent of the total tax paid in 2014 to 6.22 per cent in 2024.
For those earning between Rs 7 lakh and Rs 10 lakh, the tax liability was an average of Rs 43,000 annually as income tax in the previous financial year. “This equates to 4-5 per cent of their income which is among the lowest tax rates in the emerging economies,” adds the official. Additionally, unlike under the UPA government, those earning up to Rs 7 lakh have no liability to pay income tax.
Yet despite this reduced burden on the middle class, there has been a significant increase of 120 per cent in returns filed during the last decade—from 3.6 crore in 2014 to 7.9 crore in 2024.
Driven by stringent anti-tax evasion and anti-black money laws introduced by the Modi government, income tax returns filed by individuals earning above Rs 50 lakh increased from 2.52 lakh filings in 2014 to 9.62 lakh in 2024.
With high-income earners now accounting for 76 per cent of total income tax collected, the government has managed to alleviate the tax burden on the middle-class, balancing revenue generation with equitable tax relief, says the official.