Canada announces big tax relief for middle-class Canadians: Canada has announced tax relief for nearly 22 million Canadians, saving two-income families up to $840 a year in 2026. Once enacted, the lowest marginal personal income tax rate will be cut from 15% to 14% beginning July 1, 2025.
The tax relief measure is estimated to save about $27 billion in taxes over a five-year period beginning in 2025-26 for middle-class Canadians.
Income is reported, and tax is calculated on an annual basis. To reflect a one-percentage-point cut in the lowest tax rate coming into effect halfway through the year, the full-year tax rate for 2025 will be 14.5 per cent, and the full-year rate for 2026 and future tax years will be 14 per cent.
There are over 1.5 million Indians in Canada. In 2024, Canada welcomed 3,74,832 new citizens, with the majority being Indian nationals.
The Canada Revenue Agency will revise its source deduction tables for the July-December 2025 period, allowing pay administrators to reduce tax withholdings beginning July 1.
This means that, effective July 1, individuals with employment income and other income subject to source deductions could have tax withheld at 14 per cent. Otherwise, individuals will realize this tax relief when they file their 2025 tax returns in spring 2026.
The bulk of tax relief will go to those with incomes in the two lowest tax brackets (i.e., those with taxable income under $114,750 in 2025), including nearly half to those in the first bracket ($57,375 and below in 2025).
The rate applying to most non-refundable tax credits will continue to be the same as the lowest personal income tax rate.
The Minister of Finance also announced new measures for Canadian businesses and entities affected by the tariff dispute between Canada and the United States. These measures include the remission of some of the countermeasure tariffs announced by Canada in response to unjustified tariffs imposed by the U.S. on Canadian products.
First, the Canadian government announced a performance-based remission framework for automakers, designed to incentivize continued production and investment in Canada. In recognition of the integrated nature of the North American automotive sector, this will allow automakers that continue to manufacture vehicles in Canada to import a certain number of U.S.-assembled, CUSMA-compliant vehicles into Canada, free of the countermeasure tariffs that Canada has imposed.
Second, the Minister announced that the government intends to provide temporary 6-month relief for goods imported from the U.S. that are used in Canadian manufacturing, processing, and food and beverage packaging, and for those used to support public health, health care, public safety, and national security objectives.
Third, the new Large Enterprise Tariff Loan Facility (LETL), as announced by the Prime Minister in March, is now accepting applicants. This program will support eligible large businesses, including those that contribute to Canada’s food security, energy security, economic security,y and national security
