Nirmala Sitharaman defends income tax relief in Rajya Sabha; tables new Income Tax Bill in Lok Sabha

Finance minister Nirmala Sitharaman on Thursday defended the income tax relief announced in the budget for 2025-26 as a pro-middle class move, refuting the opposition’s allegations that it would benefit the rich and the affluent more than the less privileged.

While the move will benefit all sections of people, savings as a percentage of the total tax outgo will progressively decline as the income levels go up, she said.

Bill Tabled in Lok Sabha

The FM was replying to a general discussion on the budget in the Rajya Sabha. For instance, while people earning up to ₹12 lakh a year would get 100% tax relief, those with annual earnings of ₹24 lakh and ₹50 lakh will pay 26.82% and 9.24% lower taxes, respectively, than what they pay now, she said. This saving falls to 4.08% on an annual income of ₹1 crore, and to 0.037% on ₹100 crore.

On earnings of ₹250 crore and ₹500 crore, the reduction in tax liabilities will be just 0.015% and 0.007%, respectively, the minister said.

Earlier in the day, Sitharaman introduced the Income Tax Bill, 2025, in the Lok Sabha. It aims to replace the six-decade-old law with a simplified and taxpayer-friendly regime that will reduce litigation and bolster compliance. After the bill was introduced, she recommended that it be sent to a newly constituted select committee for detailed scrutiny. Once ratified by Parliament, it will be effective from April 1, 2026.

Rupee volatility

Sitharaman said the Centre and the Reserve Bank of India will continue to take necessary actions to stem volatility in the rupee against the greenback, seeking to allay fears over the rupee’s fall in recent months. “We believe that overvalued currencies erode national competitiveness, as exports become expensive, and domestic companies will have to be given support.”

The rupee, she said, remained among the best-performing currencies in recent months. Between October 1, 2024, and January 27, 2025, the currencies of South Korea, Indonesia and Malaysia depreciated by 8.1%, 6.4% and 5.9%, respectively, against the dollar. In contrast, the rupee weakened less than 3%, she said.

The minister said the FY26 direct tax revenue projection is “realistic” and not ambitious despite the government foregoing ₹1 lakh crore through the income-tax relief. Even excluding securities transaction tax, the non-corporate tax collection is estimated at ₹13.6 lakh crore in FY26, up 13.1% from the revised estimate for FY25. This would imply a tax buoyancy of 1.3, lower than the average of 1.74 over five years through FY24, she said.