NEW DELHI, Feb 1, 2025 (BSS/AFP) - India's finance minister unveiled broad income tax cuts on Saturday as Prime Minister Narendra Modi's government looks to bolster consumption and perk up a slowing economy.

The world's most populous country is forecast to expand at its slowest pace since the Covid pandemic in the current fiscal year, after growing at more than eight percent last year. 

Consumers have been burdened by high food inflation and weak wage growth, two factors impacting urban consumption. 

"The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment," finance minister Nirmala Sitharaman told parliament while unveiling the year's budget.

"Slabs and rates are being changed across the board to benefit all taxpayers."

The finance minister said that individuals earning an annual income of up to 1.2 million rupees ($13,800) would now be effectively exempt from paying income tax.

It nearly doubles the previous tax-free threshold of 700,000 rupees.

Cuts were also announced for a newer system introduced in 2020, with annual incomes of 1.6 million rupees to 2.4 million rupees now attracting a tax rate of between 20 percent and 25 percent, down from the earlier rate of 30 percent.

"The middle class provides strength for India's growth," Sitharaman said.

The changes would result in the Indian government foregoing revenue worth 1 trillion rupees ($11.5 billion), she added.

India will post a deficit of 4.8 percent of gross domestic product this financial year, below the 4.9 percent projected during last year's budget, likely helped by lower capital expenditure. 

The benchmark Nifty index gave up initial gains it made during Sitharaman's speech and was trading 0.19 percent lower on Saturday afternoon in a special budget trading session of the Mumbai bourse.