Union Budget 2025: Govt may cut income tax for salaries up to ₹15 lakh per year, says report

Union Budget 2025-26 may bring huge relief for the middle class as a Reuters report on Thursday claimed that the government is considering cutting income tax for individuals earning up to ₹15 lakh a year.

The report, quoting two persons familiar with the matter, suggested that the decision on the size of the potential tax cuts would be finalised closer to the budget presentation by Finance Minister Nirmala Sitharaman on February 1.

If implemented, the tax cut is expected to benefit crores of taxpayers, particularly urban residents grappling with high living costs. However, the cuts are likely to reportedly apply to those opting for the new tax regime introduced in 2020, which offers lower rates but eliminates key exemptions such as those on provident funds, loans, house rentals and insurance premiums.

Indian taxpayers currently have a choice between two regimes: the old tax structure allowing exemptions and deductions, and the new one with lower tax rates at the cost of foregoing most benefits.

The Reuters report suggested that the government is keen to encourage more taxpayers to switch to the new regime.

Comparison: New vs Old Tax Regime

Even as India remains one of the fastest growing major economies in the world, the GDP growth slowed to a seven-quarter low during July-Septembe raising widespread concerns. Former RBI governor Shaktikanta Das, who tenure ended earlier this month, repeatedly stressed the need to focus on growth-inflation balance.

High food inflation has also weighed on household budgets, dampening demand for goods ranging from daily essentials to vehicles in urban areas.

Injecting more disposable income into the hands of the middle class through the potential tax cuts could boost consumption in the world’s fifth-largest economy.