Triple bonanza this Diwali: How income tax cuts, GST reductions & repo rate cut have put around Rs 1.5 lakh in your pocket - explained

This Diwali, you have more disposable income in your hands thanks to a triple bonanza of government’s income tax rate cuts, GST rate reductions and RBI’s 1% repo rate reduction. And the higher disposable income is not a small amount - it’s over Rs 1.5 lakh at some income levels!

In this article, we take a look at how irrespective of the income level you are at, there is more money in your pocket thanks to either tax cuts, EMI reductions or a combination of both.


The Narendra Modi government announced zero income tax up to income levels of Rs 12 lakh in this year’s Budget under the new income tax regime, effective for the financial year 2025-26. While income up to Rs 4 lakh is now tax exempt, those earning up to Rs 12 lakh can avail a rebate, reducing their tax outgo to ZERO.

Latest Income Tax Slabs under New Income Tax Regime

Add to that the Reserve Bank of India (RBI) has cut the repo rate by a massive 1% this year - a big boost for those who have loans, especially home loan EMIs. Repo rate is the rate at which RBI lends to banks and its reduction allows for banks to lend to retail borrowers at lower rates.


Finally, September’s GST rate cuts across almost all items has made several household items of big and small value more affordable just at the start of the festive season.

The government announced sweeping GST rate cuts across the board, reducing the GST slabs from four to two - 5% and 18%. A 40% slab has been kept for luxury and sin goods.

The economy is set for a big consumption boost this financial year, a crucial factor at a time when the US has imposed 50% tariffs on India.

Saurabh Agarwal, Tax Partner, EY India tells TOI, “The year began with changes in income tax slabs, followed by a reduction in the repo rate, and finally, GST rate cuts across the board. These measures have had a positive impact across income segments. The GST cuts, in particular, have increased disposable incomes by making purchases more affordable. As a result, all income groups are witnessing either net savings or a boost in purchasing power making this Diwali sweeter and merrier.”

So how much more money has the government and the RBI managed to put in your hands?

• According to an extensive EY analysis, the new reduced income tax rates and GST cuts along with lower EMIs may result in annual savings of almost Rs 1.5 lakh for an individual with a salary of Rs 25 lakh!

• These savings could go up to Rs 1.8 lakh for a salary level of Rs 50 lakh. For an individual with a salary of Rs 12 lakh, EY has assumed a scenario where instead of owning a house, the person pays a rent. The savings from zero income tax and GST rate cuts would be over Rs 90,000 annually in such a scenario.

• The increase in disposable income as a result of tax reduction comes to Rs 71,500, Rs 114,400, and Rs 114,400 at Rs 12 lakh, Rs 25 lakh, and Rs 50 lakh income levels respectively. The additional annual EMI savings on account of lower home loan interest rate are Rs 13,430 and Rs 22,910 for Rs 25 lakh and Rs 50 lakh income levels

The tables above assume that an average individual saves a certain amount of their salary while keeping the rest as disposable income for expenditure purposes. The expenditures include food and beverages, clothing and footwear, housing, fuel and electricity and miscellaneous expenditures such as eating out, car/two-wheeler, insurance, personal care products, TV, ACs etc.