A trio of moves is boosting consumers’ spending power this Diwali season: (1) a Budget change that reduces income-tax outgo under the new regime, bringing the effective liability to zero for incomes up to ₹12 lakh via exemption and rebate provisions; (2) a cumulative 1 percentage point cut in the RBI’s repo rate this calendar year, easing retail lending rates and EMIs; and (3) a September reset of GST slabs to two broad rates, 5% and 18%, with a 40% rate retained for luxury and sin goods, making a wide range of household purchases more affordable.
Income tax: zero liability up to ₹12 lakh (This Diwali)
- The Union Budget for FY2025-26 revamped the new income-tax regime so that while income up to ₹4 lakh is exempt, individuals earning up to ₹12 lakh can claim a rebate that lowers tax payable to zero. This is applicable under Section 115BAC(1A) of the new regime.
- The updated rate structure continues with progressive slabs above that threshold.
EMIs: repo rate cuts feed through
- The Reserve Bank of India has lowered the policy repo rate by a total of 1 percentage point this year, across three moves, which enables banks to pass on lower rates to retail borrowers—particularly visible in home-loan EMIs.
Prices: GST rationalisation
- In September, the government announced sweeping changes to GST: the earlier four-rate structure was compressed to two core slabs 5% and 18%. A 40% rate remains for luxury and sin categories. The timing, right ahead of the festive period, has made many everyday and big-ticket items relatively cheaper.
Together, the tax tweak (which reduces or eliminates liability for many under the new regime), lower borrowing costs, and GST rationalisation all raise effective disposable income and ease near-term household budgets, especially for salaried taxpayers and home-loan borrowers heading into the peak shopping weeks of Diwali.
Policy changes across direct taxes, interest rates, and indirect taxes are pulling in the same direction this season: less tax for many under the new regime, lower EMIs, and a simpler GST with broader relief on prices, together creating a clear festive-season tailwind for consumer spending.
