Union Budget 2025: Zero Tax – But What’s the Cost to the Environment?
01-Jan-1970

by Swathi Eli Venkappa 

On 1st February 2025, Union finance Minister Nirmala Sitharaman announced a major change in the income tax regime, offering much needed relief to salaried individuals. The new tax proposal, effective from Financial Year 2025-26, states that Salaried individuals earning up to Rs 12.75 lakh will no longer have to pay any income tax. With approximately 30% of Indian population being middle class, the decision undoubtedly brought festivity in
the air.

While it leaves decent lumpsum into the hands of taxpayers, the government’s basket is set to take a massive hit, with an anticipated revenue loss of Rs. 1.00 lakh crore. The hope is that increased disposable income will stimulate economic activity leading to greater indirect tax collection, effectively offsetting the revenue shortfall. At a glance, we might feel it’s a prudent move. More money in the hands of people means more consumption, which in turn fuels economic growth. But this raises a crucial question: where will this additional money be spent? It is no myth that increased purchasing power leads to higher demand for goods and services. But that also means an inevitable rise in waste generation. According to the Ministry of Environment, Forest and Climate Change, India currently generates 62 million tons of waste (both recyclable and non-recyclable) every year, with an average annual growth rate of 4%.

If this extra income translates to second cars in households, more trips to tourist destinations, larger home appliances, social gatherings, or frequent shopping sprees, then we must also account for the long-term environmental cost. The increased demand for products and services comes with a parallel surge in waste generation, resource depletion, and carbon footprint expansion. The government cannot push for environmental consciousness on one hand while encouraging higher consumption on the other. Globalization and ecological crises cannot be examined in silos, these are interconnected.

To be clear, this is not about dictating how people should spend their money. Individuals have the right to make their own financial choices. However, there is an undeniable responsibility on the government to facilitate sustainable consumer choices. Making eco-friendly products accessible, enforcing stricter waste management policies, and promoting circular economy measures. While it may seem like an individual's decision on what to consume is independent, the government holds unparalleled power in influencing these choices in multiple ways.

In an increasingly materialistic world, the conversation around sustainability often revolves around extended producer responsibility (EPR). While EPR is critical, there is an equally urgent need to emphasize consumer responsibility. It is not enough to hold manufacturers accountable consumers must acknowledge the impact of their choices. A tax break may feel like a financial boost today, but if it drives unchecked consumption without
sustainable alternatives, the long-term cost of the environmental degradation will be far greater than the immediate economic benefits. The balance between economic growth and ecological responsibility is delicate, and therefore call for the conscious consideration.

In the end, we cannot overlook the fact that more goods and services do not necessarily mean equivalent well- being. Research psychologists at Harvard, have prepared a cognitive guidance on ‘How to Spend It.’ This guide elaborates 8 specific principles to derive more happiness from income. Emphasizing on ideas like buy experiences and not things to listen to others about what can bring happiness. It might be time we cater to the needs of our inner self while attending to our wants.

Beyond tax relief, it is crucial to recognize the hidden costs we pay due to the unseen impact of increased spending. As we embrace financial relief, our consumption pattern must reflect the consciousness in nurturing both personal well-being and planetary health.