Good news for Indians in Canada? How Mark Carney's new tax cut could benefit middle class

In its first major policy decision, the newly elected Mark Carney government has announced a reduction in federal income tax rates—offering relief to over 22 million Canadians. This includes a significant number of Indian immigrants living and working in Canada, many of whom fall within the income brackets that will see direct benefits from the change.

What Has Changed?

The cabinet decision reduces the lowest federal income tax rate by one percentage point. For the second half of 2025, the effective tax rate for the lowest bracket will be 14.5%, dropping to 14% from 2026 onward. This applies to income up to $57,375—the first federal tax bracket. Individuals within this bracket could save up to $420 annually, while a two-earner household could benefit by as much as $840 a year. These savings will either show up directly through reduced tax withholdings starting in July or be realised during the tax return process in spring 2026.

Why This Matters for Indians in Canada

This is particularly relevant for Indian immigrants, a large proportion of whom are employed in middle-income sectors such as retail, hospitality, transportation, healthcare, and IT services. Those earning under $57,375 annually and classified as tax residents in Canada—based on factors like duration of stay and residential ties—will see the most direct benefits. For many Indo-Canadian families working hard to navigate Canada’s high cost of living, the tax cut offers some much-needed breathing room.

When Will You See the Impact?

The Canada Revenue Agency (CRA) will revise its source deduction tables for the July–December 2025 period, ensuring that employers can adjust payroll systems accordingly. As a result, workers will see a modest but immediate increase in their take-home pay beginning July 1. Alternatively, the benefit will be felt at tax time when filing 2025 returns in early 2026.

Who Benefits the Most?

According to the government, the majority of the relief will go to those in the two lowest income tax brackets, with nearly half directed toward those in the lowest. This includes millions of Indian-origin Canadians, especially new immigrants, students transitioning to work permits, and skilled professionals starting out in Canada’s competitive job market.

What the Government Is Saying

Prime Minister Mark Carney framed the tax cut as a response to the financial pressures many Canadians have faced in recent years. “Last month, Canadians called for change to bring down the cost of living and to put money back in their pockets. My government will be delivering that change—cutting taxes for the middle class,” he said. Finance Minister François-Philippe Champagne added that the move sets the stage for stronger economic growth by allowing hard-working Canadians to retain more of their income.

The Bottom Line

For Indian families, the tax cut marks a clear fiscal advantage—particularly for those managing dual incomes, raising children, or sending money back home. In a climate of rising rents and grocery bills, every dollar saved makes a difference. With the new tax rate in place from July, the Carney government’s first policy rollout delivers tangible gains for a demographic that has long contributed to Canada’s economic and cultural fabric.