8th Pay Commission Announced: Is Income Tax Relief Next? Experts Urge Budget 2025 Support for Middle Class

New Delhi: With the announcement of the 8th pay commission, the buzz around tax relief for the middle class in the upcoming Budget 2025 has further gained momentum. The 8th pay commission would benefit over a crore of central government employees and pensioners. There has been a growing clamor that the government should also look to provide income tax relief to private sector employees to manage the consumption demand.

The government has so far looked to reduce corporate taxes to spur demand but it has failed to generate the consumption demand as they have not increased wages, which beat inflation growth. Experts now believe that it’s high time the government puts extra money in the hands of individual through tax relief to increase consumption demand.

“There needs to be immediate relief for individual taxpayers in the Budget to boost consumption and the economy,” political analyst and commentator Amitabh Tiwari told India Today Digital.

8th Pay Commission To Boost Consumption Growth

The government utilises the pay commission to enhance consumption-led growth as witnessed during the 2008 global crisis. At that time, the government had gone for a higher fitment factor of 1.86 against the recommended 1.74 to boost consumption.

Another big measure could be tax relief for individuals as experts feel the middle class has not been duly addressed despite being a major contributor to India’s GDP.

Why Middle Class Need Relief Badly?

Experts feel that the current tax structure is hurting India’s middle class which is the main proponent of consumption in the economy.

Despite the government’s gradual increase in the exemption limit, the highest bracket of 30% tax kicks in at just Rs 15 lakh, which many experts feel should be higher.

Central government employees, numbering 49 lakh, and pensioners at 65 lakh, represent a small segment of the actual taxpayer base, which stands at 2.8 crore.

Tax expert Tiwari highlights that while the number of individuals filing tax returns has risen significantly from 3.35 crore in 2013-14 to 7.54 crore in 2023-24, the count of those actually paying taxes has only marginally increased from 1.66 crore to 2.81 crore over the same period.

This disparity is attributed to a sharp rise in zero-income tax returns, which surged from 1.69 crore in 2013-14 to 4.73 crore in 2023-24, largely due to higher income tax exemption limits introduced over the years.

“While this aligns with the government’s socio-political objectives, it falls short of meeting economic goals. In many countries, no income is exempt from taxation,” Tiwari explained to India Today Digital.

With the government establishing the 8th Pay Commission for its employees, extending relief to individual taxpayers could put more money in the hands of the middle class, fostering increased consumption and driving growth in the economy.