India's Budget 2025: A Salary Boost for the Middle Class

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has brought significant relief to the salaried middle class in India. The new income tax regime, which came into effect from April 1, 2025, has slashed income tax rates for the middle class, aiming to spur economic growth by increasing household consumption and savings. This article explores the key takeaways from the budget that directly impact the salaried middle class and their spending patterns.



The new income tax regime has introduced a simplified tax structure with lower rates for the middle class. The revised tax slabs are as follows:

* Income up to ₹12 lakh: No tax
* ₹8 lakh to ₹12 lakh: 10%
* ₹12 lakh to ₹16 lakh: 15%
* ₹16 lakh to ₹20 lakh: 20%
* ₹20 lakh to ₹25 lakh: 25%
* Above ₹25 lakh: 30%

Additionally, the tax deduction for senior citizens has been doubled to ₹1 lakh, and the TDS on rent has been raised to ₹6 lakh per annum.



The reduction in income tax rates for the middle class is expected to significantly boost their disposable income and consumption patterns. According to Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, the new tax regime will profoundly affect the structure of taxation in India, with the government focusing on supporting the middle class by raising the new tax limit basic exemption limit to ₹12 lakh (Maurya, 2025). This change will result in a substantial increase in the take-home salary for middle-class taxpayers, leading to higher disposable income.

Abbhinav R Jain, Co-founder & Chief Financial Officer, AdCounty Media, also highlights the positive impact of the revised tax structure on the middle class. He states that the new tax structure with a 'Nil tax' slab up to ₹12 lakh, considerable deductions for senior citizens, and rental income will empower the middle class by increasing their disposable income (Jain, 2025). This increased disposable income is likely to foster economic growth by encouraging consumption and savings.

The impact of the income tax reduction on consumption patterns can be validated by the growth in the services sector, which is a significant contributor to India's GDP and employment. The services sector performed well in FY24, with a robust 7.6 percent growth, and is expected to continue its growth of 7.1 percent in H1 FY25 (Rumki Majumdar, 2024). This positive development is encouraging, given the sector's significant contribution to India's GDP and employment, and is likely to be further boosted by the increased disposable income of the middle class.

In conclusion, the reduction in income tax for the salaried middle class is expected to significantly increase their disposable income, leading to higher consumption and savings, and ultimately fostering economic growth. The growth in the services sector serves as a validation of this impact on consumption patterns. The new income tax regime introduced in the Union Budget 2025 addresses several shortcomings of the previous slabs, such as complexity, lack of middle-class relief, and inadequate support for senior citizens. By simplifying the tax structure, encouraging savings and investments, and providing targeted relief to senior citizens, the new regime aims to boost economic growth and household consumption.