Significant Tax Reforms Benefit Middle-Class: Key Updates and Impacts

In addition to offering significant assistance to middle-class citizens, she has declared a thorough evaluation of the indirect tax rate structure to be conducted within the next six months. A key revision in the legislation reinstates the benefit of indexation on the sale of properties purchased before July 23, 2024. Individuals or Hindu Undivided Families (HUFs) who acquired homes prior to this date may choose to pay Long-Term Capital Gains (LTCG) tax at the new rate of 12.5 percent without indexation or avail themselves of the indexation benefit and pay a 20 percent tax.

“The proposal to eliminate the indexation benefit in the Budget was aimed at unifying the tax rates across all asset categories rather than boosting revenue,” she remarked. Sitharaman emphasized that the Modi government has streamlined the tax system and simplified compliance measures without imposing substantial tax hikes. “The middle class has benefited from various tax initiatives introduced in the budgets presented by the Modi government,” she affirmed.

Commending Prime Minister Modi’s response during the Covid-19 crisis, she observed that his approach contrasted sharply with that of developed nations, which resorted to taxing their citizens to cover Covid-19 expenses. “We have moved beyond the era of aggressive tax practices. Initiatives like the Faceless Appeal Scheme and Vivaad Se Vishwas have brought relief to numerous taxpayers,” she emphasized.

The finance minister highlighted that the effective tax rate on an annual income of Rs 15 lakh was reduced to 10 percent in 2023 and further decreased this year under the new Income Tax regime. “The resolution of pending disputes and claims through the Vivad Vishwas scheme has been beneficial for the middle class and small enterprises. Moreover, the increase in the LTCG tax exemption limit to Rs 1.25 lakh from Rs 1 lakh will encourage middle-class individuals to invest in the stock market,” she explained.

Furthermore, she noted that the reduction in customs duties for labor-intensive sectors such as leather and textiles will stimulate trade and job creation.