The Union Budget and the Forgotten Taxpayer : Why Pensioners, Employees and the Middle Class Continue to Be Ignored
( by Lokanath Mishra, The Chief Adviser, The All India Pensioners Association of CBIC)
Every Union Budget is introduced with assurances of equity, growth and inclusiveness. Yet, year after year, one category of citizens remains conspicuously neglected—pensioners, salaried employees and the so-called middle class. The recent Union Budget is no exception. Despite being the most compliant contributors to the tax system, these groups have once again been denied meaningful fiscal relief.
Pensioners : Taxed Even After a Lifetime of Service
A pension is not a windfall. It is deferred wages, earned through decades of service, discipline and contribution to the economy. Taxing pension as ordinary income, without adequate relief, amounts to taxing the same earnings twice—once when earned, and again when received for subsistence in old age.
The Budget fails to recognise that :
• Pensioners live on fixed and declining real incomes,
• Medical and healthcare expenses rise sharply with age,
• Inflation erodes purchasing power far more harshly for retirees.
Yet, no exemption from income tax on pension has been granted, nor has any differentiated treatment been introduced to reflect the unique character of pensionary income.
Interest on Bank Deposits: Penalising Prudence and Safety
Even more troubling is the treatment of interest earned on bank deposits by pensioners, especially under the new tax regime.
For most pensioners :
• Bank deposits are not investments for growth,
• They are safe instruments for survival, liquidity and medical emergencies,
• Risk-based instruments like equities or mutual funds are neither suitable nor advisable.
By taxing interest income without meaningful exemption, the system effectively penalises pensioners for choosing safety over speculation.
A strong and justifiable demand therefore is:
• Complete exemption of interest earned on bank deposits by pensioners, at least up to a reasonable threshold, under both old and new tax regimes.
Without such exemption, the so-called “simplified” new regime becomes actively hostile to senior citizens, pushing them into financial insecurity.
Standard Deduction: Equality in Law, Inequality in Impact
While the standard deduction exists, it is applied uniformly to employees and pensioners, ignoring stark differences in circumstances.
A pensioner:
• Does not incur employment-related expenses,
• But bears disproportionately higher medical and living costs,
• Has no scope for additional earnings to offset tax liability.
A higher or separate standard deduction for pensioners, preferably indexed to inflation, is therefore not a concession but a matter of substantive equality.
The Middle Class and Salaried Employees: Compliance Without Consideration
The salaried middle class continues to be:
• Fully traceable,
• Fully taxed at source,
• Largely excluded from welfare benefits.
The Budget offers no expansion of deductions, no inflation-adjusted slab restructuring, and no tangible relief. The optional new regime withdraws exemptions without providing compensatory benefits, resulting in higher effective taxation disguised as simplification.
Lessons from Tax Jurisprudence: Bona Fide Conduct Must Be Protected
Indian tax jurisprudence, particularly the consistent rulings of the Hon’ble Supreme Court in Uniworth Textiles Ltd., Cosmic Dye Chemical, Padmini Products, Pushpam Pharmaceuticals and Continental Foundation, has firmly established one principle:
Where conduct is bona fide, transparent and based on a reasonable understanding of law, harsh consequences cannot be imposed.
Courts have repeatedly held that:
• Mere liability disputes do not imply wrongdoing,
• Honest disclosure deserves protection,
• Penal consequences cannot follow good faith conduct.
If this principle governs tax adjudication, it should also inform tax policy.
Pensioners and salaried taxpayers have acted in utmost good faith:
• Their incomes are fully disclosed,
• Taxes are paid without resistance,
• There is no evasion, no suppression, no misstatement.
Yet, fiscal policy treats them as an inexhaustible revenue source, rather than as citizens deserving fairness.
Constitutional and Moral Dimensions of Taxation
A Union Budget is not merely an accounting exercise; it reflects the State’s moral and constitutional priorities. Ignoring pensioners—who have already given their productive years to the nation—undermines the principles of equity, dignity and social justice embedded in the Constitution.
Denying :
• Exemption on pension income, and
• Exemption on interest from bank deposits,
amounts to systemic economic pressure on the elderly, achieved not through law enforcement but through policy design.
Conclusion : A Call for Corrective Fiscal Justice
Pensioners, employees and the middle class do not demand favours. They ask only for recognition of their economic reality and fair application of taxation principles.
A humane and rational Budget must therefore:
1. Exempt pension income from income tax, or at least up to a substantial threshold,
2. Exempt interest earned on bank deposits by pensioners, especially under the new regime,
3. Provide a higher, inflation-linked standard deduction for pensioners,
4. Revisit the new tax regime to ensure it does not punish compliance.
Until these steps are taken, claims of inclusivity ring hollow. A system that protects bona fide taxpayers in courts must also protect them in its fiscal architecture. Anything less is not just poor policy—it is a failure of justice.
The Last Row
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Fitment Factor, Pension Revision and Constitutional Mandate : Why the 8th Pay Commission Must Deliver Substantive Justice to Pensioners ?