PM Modi was clear about tax cuts, but I had to convince Finance Ministry: FM Sitharaman

I am proud to be part of a government that genuinely hears and responds to people's voices, noted the Finance Minister.

Paraphrasing Abraham Lincoln, Finance Minister Nirmala Sitharaman on Sunday described the Union Budget as "by the people, for the people, of the people," stating that Prime Minister Narendra Modi was fully supportive of the tax cuts introduced in the budget. However, she noted that convincing bureaucrats about the tax reductions took time.

"We have heard the voice of the middle class," Sitharaman said in an interview with PTI, acknowledging the concerns of honest taxpayers who felt their aspirations were not being addressed. She highlighted that the budget aims to meet these demands while supporting the broader economic growth of the country.

In her first video interview with a private media outlet on the Budget 2025-26, Sitharaman explained the rationale behind the tax relief measures. "There are a couple of things which have been in the works for some time. One is the thought that direct tax should be simple and easy for compliance. The complex structure of the Income Tax Act needed simplification," she said. "As announced in the July 2024 Budget, we spent six months preparing the new income tax act. Our focus was on simplifying the language, reducing the compliance burden, and making it more user-friendly to eliminate rent-seeking opportunities," she explained.

When asked what convinced PM Modi to implement tax reforms, she said, "The question should be how much it takes for me to convince the ministry and the boards. It is not so much about the PM. The PM was very clear that he wanted to do something. It was for the ministry to reach a comfort level and then proceed with the proposal."

She also stated that feedback from taxpayers played a significant role in shaping the reforms. "Wherever I traveled, people told me, 'We are proud, honest taxpayers, but can you think about what you can do for us?' I discussed this with the Honourable PM, who assigned me the task to explore solutions. After thorough work within the ministry and consultations with the PM, we introduced these reforms," the FM noted.

On the narrow base of taxpayers in India, Sitharaman remarked, "Many people just outside the taxable income bracket should be encouraged to join. Those who have never paid taxes or are now eligible must be brought into the system. We need to ensure that people understand the importance of paying taxes."

Addressing the reduction in tax rates, she said, "This is the first step towards the new tax bill. We didn't wait for the new bill to implement this rate reduction; it was always our intention. The new regime shows that rates will steadily decrease. This time, we've made the transition between tax slabs smoother, and the rates are predictably structured in multiples of five."

On major tax reforms in the Union Budget 2025-26, FM Sitharaman stated, "PM Modi and his government have always listened to people from various sectors, including industry leaders and vulnerable groups like tribals. Just as Rashtrapati ji was keen on addressing their problems, PM Modi also listens to all sections. I am proud to be part of a government that genuinely hears and responds to people's voices. It's never just 'we've heard you, but can't do anything'; it's always 'we will find a way.'"