PM Modi’s Tax Reform: From Nehru to Now – How Much Less You Pay Today!

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India tax reforms 2025

Picture this: You’re living in Nehru’s India, earning ₹12 lakh a year (adjusted for inflation, of course). Excited? Don’t be. Because the government would swiftly snatch away one-fourth of your salary in taxes before you even smelled your paycheck. Fast forward to Indira Gandhi’s era, and the taxation situation turns dystopian—₹10 lakh out of ₹12 lakh would be devoured by taxes. Sounds like daylight robbery? Well, PM Modi seems to think so.

At a recent public address, Modi did not hold back in exposing the tax burdens of previous governments, claiming that even a decade ago, an individual earning ₹12 lakh had to shell out ₹2.6 lakh in taxes. And now? Zero. Not a single rupee. Sounds like a miracle, doesn’t it? But let’s take a closer look at the numbers before we throw a parade.

Understanding the Tax Evolution – Fact or Political Spin?

To put things into perspective, India’s tax system has undergone significant transformations over the decades. From the socialist-driven policies of Nehru and Indira Gandhi, where tax rates were alarmingly high, to the liberalization era of the 1990s, India has come a long way. But Modi’s claim that today’s tax is zero on ₹12 lakh income? Well, it’s not exactly the whole story.

Under the New Tax Regime introduced in 2020, individuals earning up to ₹7 lakh annually are eligible for a full rebate under Section 87A. But to say that someone earning ₹12 lakh pays zero tax is a bit of a stretch—unless they are maximizing deductions and exemptions under the old regime. But hey, when has political rhetoric ever been about fine print?

Why The Middle Class Feels the Difference Today

Let’s not completely disregard Modi’s claim—there’s some truth to it. Compared to the astronomical tax rates of the 1970s and 80s, today’s tax slabs actually favor the middle class. The government has focused on reducing direct taxes, offering rebates for lower income groups, and implementing a simplified tax regime. But let’s be clear:

If you earn ₹12 lakh today under the new tax regime, you still pay tax, though it’s far lower than in previous decades.

Effective tax planning through deductions, exemptions, and investments can significantly reduce taxable income, but not everyone qualifies for “zero tax.”

The real impact? More disposable income, higher consumer spending, and a boost to the economy.

Modi vs. Past Governments – Who Really Wins?

The comparison of tax rates across eras is fascinating. Under Nehru’s tenure, the highest marginal tax rate was over 97% (yes, you read that right). Indira Gandhi’s era wasn’t any better, with the government pocketing nearly all of the high-earners’ income. Even under Manmohan Singh, tax rates weren’t nearly as aggressive, but the relief given to the middle class was not as pronounced as it is today.

Under Modi, the focus has shifted—not just on tax cuts but on expanding the tax base. Today, more people file returns, tax compliance has improved, and digital transactions ensure less tax evasion. The result? Lower tax rates, higher revenue collection—a win-win situation for both taxpayers and the government.

Final Verdict: A Strategic Political Masterstroke?

PM Modi’s bold claim about zero tax on ₹12 lakh income may be an exaggeration, but it certainly highlights how taxation has evolved in India. Compared to past governments, the middle class genuinely benefits from lower taxes, and that’s a political victory worth celebrating. Whether this is a genuine economic breakthrough or just an election strategy, one thing is clear—taxpayers today have it way easier than before. And for that, we can at least breathe a little easier.

What’s your take? Are Modi’s tax reforms the real deal, or is this just another political sugar rush? Drop your comments below!