Budget 2025: What Middle Class And Lower Income Group Can Expect

The Modi government is all set to announce its second full budget for the third term in power, and the country's middle class has high hopes. From insurance affordability to simplification of personal tax laws, Budget 2025 could empower the middle and lower income groups and reduce their burden with certain key reforms.

Dhirendra Mahyavanshi, co-founder and CEO of Turtlemint, recommends the government strengthen the insurance sector, in line with the target of achieving 'Insurance for All by 2047.' Mahyavanshi says reconsidering the 18% GST on health insurance policies and tax relief measures for annuity and pension products could help advance financial inclusion and security.

"Prioritising accessibility in rural areas would enable underserved populations to benefit from essential coverage. These reforms would enhance affordability for the middle class and encourage greater retirement savings, resulting in wider adoption of insurance products across diverse demographics," he said.

Besides, financial literacy, retirement planning, and transparency in financial products are among the key focus areas this year. Financial advisor Viplav Majumdar, the director of Planyourworld.com, says by making financial education accessible to all, the government can provide people tools that are required to manage their money effectively, reduce dependency on intermediaries, and make long-term wealth.

"The government should come up with a policy for promotion of financial education, so it should be available for the masses. Financial planning is more necessary for common people to accomplish their basic goals of life," said Majumdar.

He also urges the government to increase tax incentives for retirement-focused savings instruments and expand the scope of existing schemes like the National Pension System (NPS).

"Simplifying investment processes, capping hidden charges in products like unit-linked insurance plans, and promoting direct plans will empower individuals to retain more of their earnings while fostering trust in the financial ecosystem," added the investment advisor.

Tax relief measures for lower- and middle-income households are anticipated, which could stimulate discretionary consumption, Bajaj Broking has said in a Budget 2025 expectations note.

Among the income tax relief for the middle class, the government is expected to raise the basic exemption limit under the new tax regime from Rs 3 lakh to Rs 5 lakh.

"This adjustment aims to reduce the tax burden on lower-income groups and enhance disposable income, thereby boosting consumption. Taxpayers are also hoping increased deductions under Section 80D for health insurance, Section 24(b) for home loan interest, and Section 80C for investments," said Girish Kumar, Research Analyst at Share India Securities.

Apart from an increase in the basic exemption limit to Rs 5 lakh, the middle class anticipates relief through a raise in the standard deduction from Rs 75,000 to Rs 1.25 lakh in the new tax regime and simplification of the new tax regime, according to Asit C. Mehta of Investment Intermediates Ltd.

According to Nangia & Co LLP Founder and Managing Partner Rakesh Nangia, the budget should focus on simplification of income tax return (ITR) forms and further rationalisation of capital gains tax and tax deduction at source (TDS) threshold and tax rates, reported PTI.

"The salaried people are hit by inflation as well as burdened in filing ITR forms. Personal income, inflation and compliance income tax slabs need to be rationalised. Basic exemption should hit Rs 10 lakh. Personal I-T salaried people are hardest hit. Standard deduction should be increased so that there is additional cash in their pocket, which would in turn spur consumption," Nangia told PTI.