Poor, Middle Class, or Upper Class? The 2025 Budget Breakdown
Nidhi | Feb 06, 2025, 10:26 IST
( Image credit : Pexels )
The 2025 Budget has redefined tax relief for middle-income families while also spotlighting the evolving economic divisions in India. This article breaks down income brackets in India—poor, middle class, and upper class—explaining what these categories mean in terms of annual income and lifestyle. With tax exemptions for incomes up to ₹12.75 lakh, understanding where you stand has never been more crucial.
“Where do you really stand?” It’s a question that nags at many of us every budget season. The ever-shifting economic landscape redefines what it means to be poor, middle class, or upper class. Income brackets that once determined class divisions have started blurring as inflation, cost of living, and lifestyle choices evolve. With the 2025 Budget introducing tax relief for those earning up to ₹12.75 lakh annually, it’s time to take a closer look at where the lines are drawn in India’s financial hierarchy.
Let’s be clear—these categories aren’t rigid or universally agreed upon. Class definitions are approximations and largely depend on how income translates into lifestyle. But a closer look at income brackets and the latest data gives us a useful snapshot of how these divisions stack up in 2025.
In India, income groups can broadly be categorized based on annual earnings, but lifestyle and cost of living play a significant role in determining where a family stands economically. For instance, a family earning ₹10 lakh annually may feel financially stable in a small town, while the same income may not stretch far in a metro city like Mumbai or Delhi.
Households earning less than ₹1.25 lakh annually are generally categorized as poor. These families often struggle to meet basic needs like food, shelter, and healthcare and may depend on government schemes and social welfare programs for survival. Meanwhile, aspiring households with an income between ₹1.25 lakh and ₹5 lakh annually have a slightly better financial situation but still face challenges in saving for future needs. This group primarily focuses on essentials, with limited disposable income.
The middle class—a broad category with an annual income between ₹5 lakh and ₹30 lakh—encompasses a wide range of lifestyles. For some, this income allows for a comfortable life with savings and occasional luxuries. However, in metro cities, rising costs of housing, education, and healthcare can reduce disposable income and create financial strain, even for those at the upper end of this bracket.
The 2025 Budget brought a significant relief to the middle class by increasing the tax exemption limit. Households with an income of up to ₹12.75 lakh are now exempt from paying income tax under the new regime. This move is expected to reduce the financial burden on middle-income families, allowing them to focus more on savings, investments, and long-term financial planning.
This relief is especially important given the economic pressures faced by this group. Rising inflation, coupled with increasing education and healthcare expenses, has made managing finances more challenging for middle-class families, especially those in urban areas.
The upper middle class typically includes households with an annual income between ₹20 lakh and ₹50 lakh. These families enjoy a higher standard of living, often with access to luxury services, private education, and robust savings or investments. They can afford international travel, high-end consumer goods, and significant real estate investments. Beyond this, households earning more than ₹50 lakh annually are considered part of the high-income group.
Globally, those earning over $50 (approximately ₹4,100) a day are classified as high-income earners, while those earning between $20 (around ₹1,640) and $50 per day fall into the upper-middle-income category. These benchmarks provide a broader context but don’t fully account for the varying cost of living across India’s regions.
Being middle class in India is not just about income—it’s about aspirations and lifestyle. Middle-class families prioritize homeownership, education for their children, and healthcare security. While they may enjoy modern amenities like cars, smartphones, and vacations, they also face financial pressures, particularly in urban areas where housing and education costs are high.
Middle-class families are often caught in a balancing act—aspiring for a better life while managing financial constraints. For instance, sending children to private schools or investing in higher education abroad might be an achievable goal for some, but it requires careful financial planning and trade-offs in other areas.
Income categories are useful for understanding economic trends, but they aren’t set in stone. Regional disparities, inflation, and the cost of living can make the same income feel vastly different depending on where a family resides. A ₹10 lakh annual income can mean a comfortable life with savings in a Tier 2 city, but it may barely cover basic expenses in a metropolitan city like Mumbai or Bengaluru.
The World Bank provides a global framework for income classification, but it often needs to be adapted to local realities. In India, what qualifies as middle class or poor is subjective and changes based on economic conditions and individual perspectives. The 2025 Budget attempts to address these challenges by offering targeted relief to middle-income families while ensuring that lower-income groups continue to receive government support.
India’s socio-economic landscape is constantly evolving, driven by policy changes, economic growth, and shifting aspirations. As the middle class grows, so do its demands and expectations. The 2025 Budget reflects an effort to address these evolving needs by offering tax benefits and focusing on inclusive growth.
Understanding where you stand in this complex structure is not just about numbers—it’s about lifestyle, aspirations, and long-term financial planning. Whether you identify as middle class, aspiring, or upper class, financial awareness and adaptability will be key to thriving in this ever-changing environment.
Let’s be clear—these categories aren’t rigid or universally agreed upon. Class definitions are approximations and largely depend on how income translates into lifestyle. But a closer look at income brackets and the latest data gives us a useful snapshot of how these divisions stack up in 2025.
Understanding Income Groups in India
Division of Society on the basis of Income
( Image credit : Pexels )
In India, income groups can broadly be categorized based on annual earnings, but lifestyle and cost of living play a significant role in determining where a family stands economically. For instance, a family earning ₹10 lakh annually may feel financially stable in a small town, while the same income may not stretch far in a metro city like Mumbai or Delhi.
Households earning less than ₹1.25 lakh annually are generally categorized as poor. These families often struggle to meet basic needs like food, shelter, and healthcare and may depend on government schemes and social welfare programs for survival. Meanwhile, aspiring households with an income between ₹1.25 lakh and ₹5 lakh annually have a slightly better financial situation but still face challenges in saving for future needs. This group primarily focuses on essentials, with limited disposable income.
The middle class—a broad category with an annual income between ₹5 lakh and ₹30 lakh—encompasses a wide range of lifestyles. For some, this income allows for a comfortable life with savings and occasional luxuries. However, in metro cities, rising costs of housing, education, and healthcare can reduce disposable income and create financial strain, even for those at the upper end of this bracket.
Relief for the Middle Class: The 2025 Budget Highlights
Budget 2025
( Image credit : Times Life Bureau )
The 2025 Budget brought a significant relief to the middle class by increasing the tax exemption limit. Households with an income of up to ₹12.75 lakh are now exempt from paying income tax under the new regime. This move is expected to reduce the financial burden on middle-income families, allowing them to focus more on savings, investments, and long-term financial planning.
This relief is especially important given the economic pressures faced by this group. Rising inflation, coupled with increasing education and healthcare expenses, has made managing finances more challenging for middle-class families, especially those in urban areas.
The Upper Middle Class and High-Income Households
The upper middle class typically includes households with an annual income between ₹20 lakh and ₹50 lakh. These families enjoy a higher standard of living, often with access to luxury services, private education, and robust savings or investments. They can afford international travel, high-end consumer goods, and significant real estate investments. Beyond this, households earning more than ₹50 lakh annually are considered part of the high-income group.
Globally, those earning over $50 (approximately ₹4,100) a day are classified as high-income earners, while those earning between $20 (around ₹1,640) and $50 per day fall into the upper-middle-income category. These benchmarks provide a broader context but don’t fully account for the varying cost of living across India’s regions.
What Does It Mean to Be Middle Class Today?
Social Division of a Society
( Image credit : Pexels )
Middle-class families are often caught in a balancing act—aspiring for a better life while managing financial constraints. For instance, sending children to private schools or investing in higher education abroad might be an achievable goal for some, but it requires careful financial planning and trade-offs in other areas.
Why Defining Income Groups Is Complicated
Income Level in society
( Image credit : Pexels )
Income categories are useful for understanding economic trends, but they aren’t set in stone. Regional disparities, inflation, and the cost of living can make the same income feel vastly different depending on where a family resides. A ₹10 lakh annual income can mean a comfortable life with savings in a Tier 2 city, but it may barely cover basic expenses in a metropolitan city like Mumbai or Bengaluru.
The World Bank provides a global framework for income classification, but it often needs to be adapted to local realities. In India, what qualifies as middle class or poor is subjective and changes based on economic conditions and individual perspectives. The 2025 Budget attempts to address these challenges by offering targeted relief to middle-income families while ensuring that lower-income groups continue to receive government support.
The Bigger Picture: An Evolving Economic Landscape
Understanding where you stand in this complex structure is not just about numbers—it’s about lifestyle, aspirations, and long-term financial planning. Whether you identify as middle class, aspiring, or upper class, financial awareness and adaptability will be key to thriving in this ever-changing environment.