CUDA Toolkit installing outdated Graphics Driver

I currently have the driver version of 372.70. But installing CUDA Toolkit 7.5 for windows 10 x64, it tries to install Graphics driver of version 353.90. When I unchecked it, GPU Deployment Kit also gets unchecked. Am I supposed to downgrade the driver to install the toolkit?

No, unchecking the driver install is correct. The CUDA toolkit installer is not updated every time a new driver is released.

If you still want the GPU deployment kit (not necessary for CUDA development) you can install CUDA 8RC which will have a newer driver installer. In that case, you would need to remove/replace your 372.70 driver.