Finance Minister Sitharaman Calls Budget 2025-26 ‘By the People, For the People’ – Details PM Modi’s Push for Middle-Class Tax Cuts
New Delhi, February 2 – Union Finance Minister Nirmala Sitharaman has described the Union Budget 2025-26 as a "budget by the people, for the people", quoting former U.S. President Abraham Lincoln to highlight its focus on public welfare. She revealed that Prime Minister Narendra Modi strongly supported tax cuts for the middle class, but convincing bureaucrats and tax officials took time.
PM Modi Advocated for Middle-Class Tax Relief
In an exclusive interview with PTI, Sitharaman stated,
"We heard the voices of the middle class, who, despite being honest taxpayers, felt their aspirations were not being fulfilled."
The finance minister noted that PM Modi had directed her to explore ways to provide tax relief, as many taxpayers expressed concerns about the rising cost of living and inflation. While the Prime Minister quickly approved the tax relief proposal, the finance ministry and the Central Board of Direct Taxes (CBDT) needed convincing due to revenue concerns.
Biggest Tax Relief in Nearly Two Decades
Sitharaman, presenting her eighth Union Budget on Saturday, announced a historic increase in the income tax exemption limit, raising it from ₹7 lakh to ₹12 lakh under the new tax regime.
This ₹5 lakh increase is the largest tax relief ever granted in a single budget, equivalent to all tax reliefs given between 2005 and 2023 combined.
"The Prime Minister summed it up well—this is truly the people’s budget," she added.
New Tax Regime to Boost Consumption & Savings
Sitharaman emphasized that the revised tax structure would leave more disposable income in the hands of taxpayers, boosting domestic consumption, savings, and investment.
The finance minister revealed that discussions on tax reduction had been ongoing for some time, with efforts to simplify direct taxation and reduce compliance burdens beginning with the July 2024 Budget. A new tax law is also in the works, which will make legal language simpler and compliance easier.
How the Decision Was Made
Sitharaman explained that after extensive public feedback, PM Modi personally reviewed the tax cut proposal and gave his approval. However, she admitted that convincing the finance ministry and CBDT officials took longer.
"Your question should not be about how much effort it took to convince the Prime Minister, but rather how long it took to convince the ministry and tax authorities," she remarked.
According to Sitharaman, while Modi was clear about wanting tax cuts, bureaucrats had to ensure that revenue collection remained stable to fund welfare and development projects.
"Officials kept reminding me of the revenue implications, which was fair, but eventually, everyone agreed on the tax cuts," she said.
Expanding India’s Taxpayer Base
While the budget provides major tax relief, Sitharaman clarified that efforts to increase the tax base will continue.
Currently, 8.65 crore Indians file income tax returns (ITRs), and when including those subject to Tax Deducted at Source (TDS), the figure exceeds 10 crore.
"There are still many individuals outside the tax net, some of whom now earn enough to pay taxes or have been evading them. Our goal is to ensure fair and broader tax collection," she added.
Defending Capital Expenditure Allocation
The budget’s capital expenditure (CapEx) allocation has been raised to ₹11.21 lakh crore for FY 2025-26, up from ₹10.18 lakh crore in the revised estimate for FY 2024-25. Some experts have argued that the increase is smaller than expected, but Sitharaman defended the allocation, citing a focus on spending quality rather than just higher figures.
"Since 2020, we have increased capital expenditure by 16-17% annually. Now, some are questioning why this year’s increase isn’t as high. But I urge them to focus on the quality of spending rather than just the numbers," she said.
She also noted that capital spending slowed in 2024 due to the election cycle, affecting the revised estimates. Had elections not delayed projects, the final spending figures would have been closer to the budget estimates, she explained.
With massive tax cuts, a focus on domestic consumption, and sustained capital investment, the Union Budget 2025-26 is set to have far-reaching impacts on the middle class and economic growth. As PM Modi pushes for tax reforms, Sitharaman has ensured that the budget aligns with the government’s pro-people, pro-growth vision, making 2025 a landmark year for Indian taxpayers.
