 "The middle class forms a key voting bloc in Delhi. Representational Image/Reuters")
The middle class could arguably be the biggest winner of Budget 2025. In her speech on Saturday (February 1), Union Finance Minister Nirmala Sitharaman announced a major tax relief that would leave more money in the hands of salaried individuals.
She said that people with an annual income of up to Rs 12 lakh do not have to pay income tax. “I am now happy to announce that there will be no income tax payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime,” the finance minister announced.
With the tax respite coming just days before Delhi goes to vote, there is a possibility that the move could work in the favour of the Bharatiya Janata Party (BJP) in the Assembly polls.
Let’s take a closer look.
Wooing the middle class
Finance Minister Sitharaman mentioned the middle class prominently in her speech, acknowledging its contribution as the “engine” of the economy.
“The middle class provides strength for India’s growth. This Government under the leadership of Prime Minister [Narendra] Modi has always believed in the admirable energy and ability of the middle class in nation building,” Sitharaman said in Parliament.
Not just the FM, President Droupadi Murmu and PM Modi also talked about the middle class ahead of the Budget.
Addressing reporters a day before the Budget, he said, “I pray that Maa Lakshmi continues to bless the poor and middle class of our country and continue to shower her blessings.”
In her Budget speech yesterday, Sitharaman raised the tax rebate limit under the new regime from Rs 7 lakh to Rs 12 lakh. This means ‘zero tax’ for individuals with an annual income of up to Rs 12.75 lakh (due to a standard deduction of Rs 75,000).
Will it benefit BJP in Delhi polls?
The BJP has been out of power in Delhi for over two decades. This time, it has launched an aggressive campaign to dethrone the ruling Aam Aadmi Party (AAP).
The middle class constitutes an important voting bloc in Delhi. There was a growing call for bringing relief to the middle-class taxpayers stung by high costs.
Delhi has 40 lakh income taxpayers. According to a 2022 PRICE survey, the middle class is the National Capital’s largest income-based group.
More than 67 per cent of the households in Delhi reportedly belong to the middle class, making them a key demographic in elections.
After the FM’s announcement, the BJP is hoping to cash in middle-class votes ahead of the Delhi Assembly elections on February 5.
The Election Commission had barred the BJP-led Central government from making Delhi-centric announcements in the Union Budget.
Delhi BJP leaders have welcomed the tax relief in the Budget, saying it will boost the confidence of the middle class in the BJP.
Speaking to PTI, Delhi BJP president Virendra Sachdeva said, “We have already made several announcements for the middle class in our budget, and we will continue to do more for them in the future. The income tax relief for those with an annual income of Rs 12 lakh will have a significant impact on the upcoming Delhi Assembly polls.
“There is a large number of taxpayers in Delhi who will benefit, and this is a budgetary gift to the middle class,” he added.
The BJP’s core voter base – the upper middle class and trading community – remains intact in Delhi, as per LiveMint.
If it succeeds in wooing the middle class with the Budget, the saffron party would have an added advantage in the coming polls.
A challenge for AAP
The AAP, whose top leaders are battling corruption allegations, could be in a tough spot if it is abandoned by the middle class.
It was former Delhi Chief Minister and AAP chief Arvind Kejriwal who, to lure the middle class, listed a seven-point demand, urging the Centre to scrap income tax for those earning up to Rs 10 lakh.
Dubbing it the ‘manifesto for the middle class’, Kejriwal alleged the middle class was a victim of the BJP’s “tax terrorism” and the most harassed in India.
“Fifty per cent of their salary goes into paying taxes. From groceries, milk, curd, to popcorn and even pooja samagri is being taxed heavily,” he said last month.
The Centre led by the BJP has not only met this demand but increased tax rebate to Rs 12 lakh instead of Rs 10 lakh.
The AAP, which fought its first Delhi Assembly elections in 2013, had made inroads into the middle-class vote bank through its anti-corruption poll plank.
Later, its welfare schemes helped attract poor and lower middle-class voters. The AAP is vying to return to power for a fourth term in Delhi.
According to a post-poll survey by Lokniti-CSDS, between the 2015 and 2020 Delhi Assembly polls, the BJP managed to narrow the gap with the AAP among poor, lower-income, and middle-income voters.
The income tax respite can now be used by the BJP to counter the AAP’s renewed efforts to sway middle-class voters.
“The tax slab relief will obviously impact Delhi elections. The BJP has been for long trying to puncture AAP’s clean government plank. The middle-class voter in Delhi has been swinging. It voted for the AAP in the last election. And if the 6 per cent gap swings in BJP’s favour this time, the AAP will face a defeat,” banker-turned-political analyst Amitabh Tiwari told LiveMint.
With inputs from agencies