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In a move to provide relief to middle-income earners facing inflation, the federal government has proposed major relief for salaried workers by lowering income tax rates in Budget 2025-26.
According to the finance minister’s budget speech, the government aims to reduce the burden on those earning between Rs 600,000 and Rs 1.2 million annually by slashing tax rates.
Currently, individuals in this bracket pay five percent tax, however, under the new proposal, the rate would drop sharply to just one percent, offering significant savings for these taxpayers.
A specific example shared during the speech was that people earning Rs 1.2 million annually currently pay Rs 30,000 in taxes will now have to pay only Rs 6,000.
For those earning up to Rs 2.2 million per year, the minimum tax rate will also be reduced. Instead of 15 percent, they would pay a new rate of 11 percent.
This step is part of a broader plan to ease financial stress on salaried professionals and encourage tax compliance across income levels.
READ: Non-filers banned from buying property, vehicles, opening bank accounts
Taxpayers earning from Rs 2.2 million to Rs 3.2 million annually would also benefit. The government has proposed to cut their tax rate from 25 percent down to 23 percent.
The government says this proposal aims to support salaried individuals during economic recovery.
Check updated tax slab
