From John Mathai To Nirmala Sitharaman, Here Is A Look Back At History Of Income Tax In India

Taxation and income tax were the biggest topics of discussion after the previous Union Budget on July 23, 2025.

The larger middle class raised their dismay and expressed their despair over no scheme of benefits for the middle class in the country.

Income Tax In India

One of the biggest topics of discussion is the income tax and the income tax slabs.

Currently, there are two active regimes in India. The so-called ‘Old Regime’ and the ‘New Regime’.

The Old Regime essentially has 5 slabs, compared to the New Regime, which has 6 slabs.

This allows us the time, to go back in time and gauge the history of income tax slabs in India.

John Mathai 1949-50

The first ever tax slab came into being during the tenure of former finance minister John Mathai.

Mathai was a pioneer as he tried to reduce the taxes in a young independent India in 1949-50.

Taxes on incomes up to Rs 10,000 were lowered by John Mathai by a quarter of an anna, from one anna to nine pies in the first slab and from two annas to “one nine pies” in the second.

YB Chavan 1974-75

The former chief minister of Maharashtra was also the FM of the nation. Chavan in fiscal year 1974-75 brought about a major revision in Income Tax slabs.

Taxes at all income levels were lowered, as the maximum marginal rate was cut from the astrnomically high 97.75 per cent to 75 per cent.

Here, the maximum marginal rate in income tax refers to the highest percentage of tax levied from individuals with income belonging to the highest slab.

VP Singh 1985-86

The former PM, who was also the FM, brought about another monumental change. In a landmark move, VP Singh brought the total slabs down from eight to four.

This was a part of the restructuring of the taxation system that was carried out by the then-Rajiv Gandhi government.

Individuals with an income of under Rs 18,000 were not liable to pay taxes.

Thereafter, the individuals in the income lab of Rs 18,000 to Rs 25,000, had to pay 25 per cent in taxes. The highest of the four slabs saw people earning above Rs 1 lakh pay 50 per cent tax.

Here, the previously mentioned maximum marginal rate was brought down further from 61.8 per cent to 50 per cent.

Manmohan Singh 1992-93

Manmohan Singh, arguably the most consequential FM of the country, who oversaw the liberalisation of the economy, also revised tax slabs.

This was also the first revision in IT slabs after liberalisation. Singh further reduced the slabs to 3.

This is the lowest it has ever been.

Furthermore, the tax paid by the highest earners in the last slab was brought down from 50 to 40 per cent.

P Chidambaram 1997-98

The new FM Chidambaram, who would also go on to become the longest serving FM, presented his famed ‘Dream Budget’.

Apart from all other aspects, the last big revision in IT slabs, before the turn of the millennium, saw the FM, move the tax rates in the slabs altogether.

This paradigm shift included shunting tax rates from 15 per cent, 30 per cent and 40 per cent to 10 per cent, 20 per cent and 30 per cent.

Earners with an income of Rs 40,000 to Rs 60,000 paid 10 per cent tax, and the highest slab of income above Rs 1.5 lakh paid 30 per cent. In addition, limit of standard deduction was increased to Rs 20,000.

P Chidambaram 2005-06

Once again, P. Chidambaram comes to the fore. In 2005-06, he said that people making up to Rs 1 lakh pay no tax, those making between Rs 1 lakh and Rs 1.5 lakh pay 10 per cent tax, those making between Rs 1.5 lakh and Rs 2.5 lakh pay 20 per cent tax, and those making more than Rs 2.5 lakh pay 30 per cent tax.

Pranab Mukherjee 2012-13

After Chidambaram, it was the Mukherjee Era, after revision in 2010-11, wherein he increased the no-tax liability from Rs 1 lakh to Rs 1.6 lakh, Mukherjee introduced new changes in 2012-13. He reintroduced the 4 slab system and increased the exemption limit to Rs 2 lakh.

In the next slab, taxpayers in the income bracket of Rs 2 lakh and Rs 5 lakh paid a tax of 10 per cent. In the last slab, those making above Rs 10 lakh annually paid 30 per cent tax.

Arun Jaitley 2014-15

This was Arun Jaitley’s first budget, and with him, he brought a hammer that smashed one of the key components of taxation in India.

Jaitley abolished the wealth tax and replaced it with a surcharge of 2 per cent on the ultra-rich having a taxable income above Rs 1 crore.

This was the Modi era’s first full budget.

Arun Jaitley 2017-18

Nearly three years later, it was Arun Jaitley again. In an attempt to reduce the tax burden, he reduced the rate of the smallest slab.

He brought it down to 5 per cent for Rs 2.5 lakh and Rs 5 lakh from the previous 10 per cent.

Nirmala Sitharaman Era

The incumbent FM has presented 7 budgets. This will be Nirmala Sitharaman’s 8th budget.

In her decade as FM, she has brought about changes in the IT slabs that have delivered the existing tax systems, consisting of two regimes, the Old and the New Regime.

Old Regime

In the Old Regime, citizens opting for the scheme with an income of Up to Rs 2,50,000 are not liable to pay taxes, ie no need to pay any tax. Thereafter, taxpayers with income in the range of Rs 2,50,001 – Rs.3,00,000 have to pay 5 per cent.

The income slab of Rs 3,00,001 – Rs 5,00,000 has 5 per cent income tax. Furthermore, the income slab of Rs 5,00,001 to Rs 10,00,000 pays 20 per cent. And, in the last slab of Rs 10,00,001 and above, taxpayers are subjected to 30 per cent.

New Regime

Similarly, in the New Regime, citizens with an income of Up to Rs 3 lakh pay no taxes, further Rs 3 lakh – Rs 7 lakh pay 5 per cent, Rs 7 lakh – Rs 10 lakh pay 10 per cent, Rs 10 lakh – Rs 12 lakh will pay 15 per cent, Rs 12 lakh – Rs 15 lakh are liable to pay 20 per cent and people earning above Rs 15 lakh pay 30 per cent.