How the aam aadmi won Sitharaman's Budget 2025

While Finance Minister Nirmala Sitharaman's Budget 2025 is not short on zeal to speed up India on the road to Viksit Bharat, what marks it out from her previous budgets is that she has put the aam aadmi squarely in the middle of her budget. Infrastructure, reforms and rural themes have dominated many of her previous budgets. The biggest highlight of Budget 2025 is the huge tax relief she has offered to the middle class taxpayer. She has announced nil tax rate for income of up to Rs 12 lakh.

Among other relief measures for the middle class, slabs and rates are also being changed across the board to benefit all taxpayers. The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment.

To tax payers upto Rs 12 lakh of normal income (other than special rate income such as capital gains) tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them, Sitharaman said.


The total tax benefit of slab rate changes and rebate at different income levels can be illustrated with examples. A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates). A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates). A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% of his tax payable as per existing rates).

The limit for tax deduction on interest for senior citizens is also being doubled from the present Rs 50,000 to Rs 1 lakh. Similarly, the annual limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh. This will reduce the number of transactions liable to TDS, thus benefitting small tax payers receiving small payments.

An Aam Aadmi budget for people, private sector and politics
Sitharaman's love for the aam aadmi stems from the recent slump in economic growth and depressed consumer demand amid high inflation and interest rates and moderation in wage growth. India's economic growth slowed to 5.4% in the July-September quarter, a seven-quarter low, raising concerns and calls for action. This drop surprised analysts who had predicted over 7% growth, and led the Reserve Bank of India (RBI) to lower its growth forecast for 2024-25 from 7.2% to 6.6%. Private consumption expenditure moderated to 6% in the second quarter, down from 7.4% in the first. This reflected weaker demand, particularly in urban areas, where households have been squeezed by elevated borrowing costs and high inflation.

The budget's tax bonanza for the aam aadmi is aimed at putting more money in his pockets so he spends more which will result in a stimulus of sorts for the overall eocnomy. This role was previously reserved largely for capital expenditure.

Amid consumer businesses seeing lacklustre demand in recent past, the clamour for relief to the middle class was high before the budget. Shares of heavyweight consumer stocks ITC, Hindustan Unilever, Dabur, Marico and a few others gained over 5% right after Sitharaman announced the tax bonanza for the middle class in her Budget speech. Common people getting more money in their pockets will help businesses which have reported tepid earning in the December quarter.

Sitharaman's Budget 2025 comes amid intensifying campaign for elections in Delhi where the BJP is making all-out efforts to unseat the incumbent Aam Aadmi Party (AAP). While the BJP has announced a number of cash transfer and other welfare schemes to lure Delhi voters, the Union Budget will boost those efforts. Common people were already looking forward to relief from Sitharaman as inflation is biting household budgets and wages remain stagnant. The budget got an added political flavour with Sitharaman announcing several projects for Bihar which is headed for polls later this year.

Though the metaphorical aam aadmi dominates Sitharaman's budget, she has eschewed irresponsible populism by aiming for a lower fiscal deficit for the next financial year at 4.4% which will make her stick to the earlier announced aim of containing the deficit below 4.5%. However, she has again slowed down the speed of capital expenditure growth, sparing the money for the aam aadmi. The vast reformist agenda unveiled in the budget to boost small industry and businesses as well as streamline financial sector and taxation also points at Sitharaman's love for aam aadmi is not at the cost of the long-tern aim of Viksit Bharat.