FM Nirmala Sitharaman Highlights Historic Tax Cuts: Direct and Indirect Taxes Slashed in Same Year

Finance Minister Nirmala Sitharaman on Friday announced that India has witnessed historic tax reductions this year, with both direct and indirect taxes cut significantly—a first in the country’s independent history. Speaking in the Lok Sabha, she said, “At no point in India’s independent history have both direct and indirect taxes been reduced so significantly within a single year.”

The minister noted that previous governments once imposed extremely high income taxes, in some cases up to 95%, whereas the Modi government has implemented substantial reductions this year. Under the Union Budget 2025, resident individuals earning up to Rs 12 lakh now have zero tax liability due to enhanced rebates and standard deductions, while middle-income brackets enjoy lower tax rates.

According to Sitharaman, these income tax revisions are expected to lead to a revenue forgone of approximately Rs 1 lakh crore, reflecting the government’s focus on easing the financial burden on citizens. The changes also make the new tax regime the default option for taxpayers, simplifying compliance.

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On the indirect tax front, the government, through the GST Council, rationalized rates from four slabs to two—5% and 18%—benefiting a wide range of essential goods. Items such as air-conditioners, televisions, small cars, and motorcycles have seen their GST reduced from 28% to 18%, while a 40% rate applies to select luxury and sin goods.

Sitharaman emphasized that the government has deliberately created fiscal space to support citizens, stating, “It is the duty of any finance minister to raise revenue to meet competing national demands. But here is a government that has already given up significant fiscal space in many ways, with two major steps taken within just one year.”

The Finance Minister’s remarks underline the government’s commitment to providing relief to taxpayers while balancing fiscal prudence, marking a historic milestone in India’s tax policy.

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