Middle Class Tax Burden Eases, While High Earners Pay More Under Modi Govt

The tax burden on individuals earning less than Rs 20 lakh a year, broadly classified as the middle class, has significantly decreased during the 10 years of Prime Minister Narendra Modi’s leadership. 

In contrast, those with annual incomes above Rs 50 lakh have seen a substantial rise in their tax liabilities, according to data from income tax returns (ITRs) filed for the 2023-24 period.

The number of individuals reporting annual incomes over Rs 50 lakh has surged to more than 9.39 lakh in 2023-24, a five-fold increase from 1.85 lakh in 2013-14. Correspondingly, the income tax liability for these high earners has jumped 3.2 times, from Rs 2.52 lakh crore in 2014 to Rs 9.62 lakh crore in 2024.

Sources reveal that 76 percent of total income tax collections now come from individuals earning over Rs 50 lakh annually, contributing to a reduced tax burden on the middle class. This increase in tax revenue from high earners is attributed to the Modi government's strong anti-tax evasion and black money laws.

Furthermore, the government's tax reforms have eased the burden on lower-income taxpayers. In 2014, individuals earning above Rs 2 lakh annually were subject to income tax, but thanks to various exemptions and deductions introduced by the Modi administration, those earning up to Rs 7 lakh are now exempt from taxes.

The proportion of income tax collected from those earning less than Rs 10 lakh has fallen from 10.17 percent in 2014 to 6.22 percent in 2024. For individuals earning between Rs 2.5 lakh and Rs 7 lakh, the average income tax liability in 2023-24 was Rs 43,000, or about 4-5 percent of their income—one of the lowest among emerging economies.

The middle class has also benefitted from inflation-adjusted tax relief, with a nearly 60 percent reduction in tax liabilities for those earning between Rs 10 lakh and Rs 20 lakh over the past decade.

In another indicator of growing tax compliance, the number of income tax returns filed has surged from 3.60 crore in 2013-14 to 7.97 crore in 2023-24, representing a 121 percent increase.