Union Finance Minister Nirmala Sitharaman is set to present Modi 3.0's first budget on July 23, sparking debate about potential new initiatives. The middle class, in particular, has high hopes for tax reductions and reforms to simplify the taxation process. India's middle class makes up about 31% of the population and continues to grow. This group has largely supported the Bharatiya Janata Party (BJP) since its inception, often acting as a decisive factor in elections. For example, a significant drop in middle-class turnout in 2004 contributed to the unexpected defeat of the Atal Bihari Vajpayee government. In the recent general election, 35% of the middle class supported the BJP-led National Democratic Alliance (NDA), a slight decline from 2019, while Congress gained two percentage points among this demographic.

The middle class contributes significantly to the government's income tax revenue, accounting for ₹10 lakh crore. With only about 3% of the population paying taxes, predominantly from the middle class, they bear a substantial tax burden. Personal income tax revenue exceeds corporate tax collections, underscoring the middle class's crucial role in funding government expenditure and welfare programs. However, this situation is unsustainable for a middle-income country like India, where the per capita income is around $2,500.

In the 2010-11 financial year, corporate tax collections were double that of personal income tax. By FY2022-23, they were nearly equal, and personal income tax collections are now budgeted to surpass corporate taxes. Despite a significant corporate tax rate cut from 30% to 22% in FY 2019-20, personal income tax rates have remained unchanged since 2012-13. Deductions have also remained static and have not been adjusted for inflation. Although a new tax regime with higher slabs was introduced in FY 2020-21, it lacked provisions for new deductions.

India's middle class lacks social security, except for government employees. Education and healthcare are not universally free, and public services often lack quality. This has led to growing discontent among the middle class, who question the value they receive for their taxes. Corruption and the politics of freebies have further fueled their dissatisfaction.

India's tax system differs from other countries. For instance, in Singapore, there is no Tax Deducted at Source (TDS) on salary income, and taxpayers have 12 months after assessment to pay taxes. Additionally, the first 20,000 SGD (approximately ₹12.4 lakh) is exempt from taxation.

Disclaimer: This image is taken from Reuters.