This article examines the disproportionate tax burden on the middle class, highlighting how limited personal disposable income, multiple taxation categories, and indirect taxes exacerbate their financial woes. While government policies frequently cater to the economically weaker sections and the affluent, the middle class remains overlooked, leading to frustration and a sense of helplessness. The study further explores challenges such as stagnant incomes, high costs associated with earning an income, and the lack of sufficient tax benefits or incentives to encourage savings and investments.

To address these concerns, the article suggests a multi-pronged approach, including revising tax slabs, improving public services, ensuring transparency in tax utilization, strengthening social security measures, and creating employment opportunities tailored to the middle class. Additionally, it advocates for financial reforms, such as higher interest rates on savings and risk-free investment opportunities, to enable economic stability and growth for this vital segment of society. By implementing these measures, the government can ensure a fairer and more sustainable tax regime that acknowledges and supports the contributions of the middle class, fostering to a more balanced economic structure in India.

Introduction
The Indian middle class, despite being the largest contributor to government revenue through both direct and indirect taxation, continues to face financial strain and neglect in policymaking. Middle-class taxpayers in India receive minimal benefits in return for their substantial contributions. Burdened with high taxes and stagnant income growth, they struggle to afford essential services such as healthcare, education, and transportation, often resorting to costly private alternatives due to the inadequate quality of public services.

The middle class who might be neglected by the Indian policy makers has been contributing the most in the government revenue by paying taxes. They continue to contribute the most out of their hard-earned income as the government taxes, both direct and indirect taxes. The salaried middle-class people having huge burdens of their family expenses are pained to bear this tax burden. Even after being the most honest and regular taxpayers, their expectations from the government remains unmet.

Government mostly pays attention to the poor and the rich while making policies and budget. Unlike other nations where citizens paying huge taxes get good quality public facilities like education, healthcare and transportation services, Indian Middle class has to rely on private schools, hospitals and transportation services as the government facilities are not upto the mark. All this makes Indian middle class to feel ignored and helpless.

How tax burden falls on the middle class

Tax burden from both direct and indirect tax systems falls directly on the middle class which leaves them with limited personal disposable income. It becomes difficult for them to do savings and investments. Even after being the biggest contributor and honest taxpayers, they get little benefit from the government schemes and services. They have to make payments to private schools for education and to private hospitals for their medical treatment. With high inflation rates and stagnant salary increments, they pay taxes regularly along with other expenses. Due to lack of support from the government, the middle class often feel stuck and helpless.

Direct tax system and limited personal disposable income

The Indian Tax system levies up to 30% tax on the salaried middle class. They pay taxes out of their hard-earned income regularly as there is nearly no chance for them to evade. The Income Tax Act of 1961 provides for certain deductions that could be claimed under sections 80C (investments), 80D (medical insurance), etc. However, these deductions do little for the middle class as it becomes difficult for them to save and invest out of their incomes in the era of inflation and stagnant incomes as well as limited increments. Unlike the unorganised sector and big businesses, the salaried middle class gets no chance for evasion and very limited deductions from the taxes. They are left behind them with less personal disposable income in their hands.

Indirect taxes and double burden

The government of India introduced and implemented Central Goods and Services Tax Act, 2017 with the aim to streamline the indirect taxes to single tax regime. Although the government levies lower taxes on the essential commodities, everything goods and services like education and healthcare are often taxed more. This again creates financial burden on the people.

Helplessness among middleclass:

1. Disparity in benefits
   The middle class often feel choked because what they expect from the government in return of their tax payment is not met. The services provided by the government like education, healthcare, transportation and public infrastructure including roads, bridges, etc are of poor quality and thus people need to pay for these services to the private sector.
    
2. Biased government policies
   The government policies mostly focus either on the upper class (the rich) or the lower class (the poor), ignoring the middle class. Those who contribute the most from their incomes as taxes are not even taken into consideration by the government. This makes the middle class section of the society ignored. The upper class often find ways to pay lesser taxes than what they were actually liable to pay as they make arrangements for certain deductions and exemptions from taxes by making investments, etc.
   
   On the other hand, the lower sections are already exempted from paying taxes but additionally gets various kinds of subsidies and benefits from the government which might be justified due to the income disparities among the Indian population. However, the subsidies or benefits provided to middle class are very few. Also they get very less deductions and exemptions from taxes.
    
3. Stagnant incomes
   With high inflation levels, the cost of living has risen sharply. However, this increase in price level is not keeping pace with the income levels of the people due to low-income levels and limited increments in salaries. Even after all this, the middle class pays major part of their incomes as taxes and in order to get deductions from taxes they are expected to invest which is nearly impossible with this situation, in the present times, the income receivers often face challenges for getting increment in their income, while inflation and high tax rates indirectly lower the levels of income earned by them.

1. Various Tax Categories
   One of the challenges faced by income taxpayers is the multiple forms of taxes they are required to pay. These taxes include deductions at source, property tax, road tax, and, despite paying substantial income tax, individuals still face additional tax burdens.
   
   For middle-class people investing in securities and other funds, the process is fraught with risk, requiring them to have a heavy heart as they also face taxation in the form of capital gains.
   
   For example, after fulfilling various tax obligations, an individual buying a car must pay an additional tax at the time of purchase. Similarly, when purchasing a house, the individual faces yet another form of taxation in the form of property tax.
    
2. Cost for income generation
   Before a person begins to earn, they go through several phases such as schooling, higher education, and other educational pursuits, all of which involve various expenses. After completing their education, they must also bear costs related to job searching, attending interviews, and transportation costs for job opportunities. However, once a person successfully secures a job, there are no deductions or reimbursements from the government or other authorities to alleviate the financial burden of these expenses, leaving individuals to bear the full weight of such costs.

Way forward:

• Revision of tax slabs: Now it's high time to revise the tax slabs by raising the tax-free limit, enhancing deductions, and introducing a luxury tax and wealth surcharge for high earners. This will provide immediate relief to middle-class households without hindering tax collection.
  
  
• Improvement in public services: The government must improve the quality of public goods and services by controlling corruption and using the nation's money and resources fairly. The quality of education and infrastructure in government schools, healthcare facilities in government hospitals, and transportation services should be improved to reduce the financial burden on citizens.
   
• Transparency in Tax Utilisation: The government must ensure that people know where their hard-earned money is being spent. Reports on infrastructure projects, healthcare development, and welfare programs should be published to build trust among taxpayers.
  
  
• Strengthened social security: The government should focus on introducing policies like universal healthcare, affordable housing, and pensions for the middle class to make them feel valued and appreciated. This will also reduce their anxiety about financial burdens.
  
  
• Encouragement in job creation and employment: The government must introduce schemes and policies for business development and employment generation for the middle class. So far, the government has primarily focused on the poor and the rich, neglecting the employment requirements of the middle class.
  
  
• High interest on savings: Indian taxpayers often struggle to find institutions or banks offering substantial interest rates on savings. As a result, they sometimes invest in the stock market or other securities that come with higher risks. To address this issue, the government or the Reserve Bank of India should introduce policies that help taxpayers save their money with lower risk and higher returns. For instance, offering a higher interest rate on fixed deposits and savings accounts in banks could be beneficial.

Conclusion
The plight of the Indian middle class as the backbone of the nation's tax revenue cannot be ignored any longer. Their silent battle, if left unaddressed, may escalate into a larger economic and social crisis. The government must acknowledge their struggles and implement tax reforms that alleviate the financial strain imposed on them. Fairer taxation, improved public services, and greater transparency in fund utilization are critical to restoring trust and equity in the system.

If the middle class continues to feel burdened and alienated, the economic and social stability of the country may be at risk. A balanced and inclusive approach to policymaking, one that considers the needs of the middle class will not only empower this crucial demographic group but also contribute to a more just and prosperous economy of the nation.

Written By:

1. Ritik Arora - 4th year BBA LLB (H) student at School of Law, Manav Rachna University
2. Aishwarya Sareen - 4th year BA LLB (H) student at School of Law, Manav Rachna University