Taking the middle class for granted

The middle class of India have always been the backbone of support for the BJP. They consider themselves proud Hindus and yet want to be part of a developing India sans any communal violence.

In the recent Lok Sabha elections too, they voted for the BJP helping the Party form the government for a historic third term.

Yet, if the recent budget presented in Parliament is any indication, the BJP appears to be taking them for granted, a very unwise thing to do.

It is the middle class that turned away from bank deposits and started investing in capital markets thereby shoring up the economy.

When Narendra Modi made a call to citizens to give up their LPG subsidy, nearly one crore people gave it up. The majority of them from the middle class, obviously.

Yet, the government in its recent budget has penalised its most loyal segment. The Budget has proposed to hike the tax on short-term and long-term gains from equities.

Short-term gains on equities will now be taxed at 20%, sharply up from 15% earlier. Meanwhile, long-term gains will attract a 12.5% tax, up from 10%. This higher tax will eat into the gains from shares and equity-oriented funds.

The higher tax burden from hike in capital gains tax is partially offset by the increase in exemption limit by increasing the tax exemption on LTCG from Rs.1 lakh to Rs.1.25 lakh in a financial year.

The government has had to increase taxes to support its various direct-transfer benefit schemes. Also, any other pragmatic measures it wanted to opt for were side-lined by the sops it had to dole out to its allies, the TDP and JD (U).

In the process, taxing the guy who is the actual contributor, is unfair. Taking the middle class for granted will be a fatal move on the part of the BJP.

The sooner it realises this, the better.