MUMBAI: Former IMF Executive Director Surjit Bhalla has urged the government to cut personal income taxes ahead of the Union Budget 2025, arguing that India is overtaxing its people whose tax burden is excessively high.
He pointed to the country’s tax-to-GDP ratio of 19 per cent, significantly higher than the 14.5 per cent average in East Asia, and questioned why India, with a much lower per capita income than the US or Korea, maintains such a high tax level.
“We are overtaxing our people to an extent not known in any other country,” Bhalla said in an interview with NDTV. He made a strong case for reducing personal tax rates instead of corporate taxes.
“First, change our FDI policy. Second, cut personal income tax rates. There was a story about a major international bank saying India needs to cut corporate taxes. Who will that benefit? Not you, not me, not anybody in the audience but corporates. They are the last people who need a tax cut. We the people need a tax cut,” he asserted.
Bhalla argued that lowering personal income tax rates would actually boost revenue. “I worked in the background on the corporate tax cut in 2019. We are not at a stage where everybody is compliant with their taxes, he added.
“So, if you cut tax rates, your revenue actually goes up. Cut taxes so you can fund more infrastructure and welfare payments. Raising taxes won’t achieve that. Cut personal income taxes, allow FDI to come in – win, win, win,” he further explained.
No more corporate tax cut, please
He dismissed calls for another round of corporate tax reductions, stating that the 2019 corporate tax cut had already been “hugely successful.” Instead, he emphasised that reducing personal taxes is now critical for increasing disposable income, boosting consumption, and driving economic growth.
Concerns that tax cuts could create fiscal gaps were brushed aside. “You think other countries don’t face funding problems? Everybody faces them. How do they solve it?” Bhalla remarked.
Calls for personal tax relief have been gaining momentum. Earlier this month, Confederation of Indian Industry (CII) President Sanjiv Puri suggested tax cuts for individuals earning up to Rs20 lakh annually to boost consumption.
PHDCCI CEO Ranjeet Mehta also proposed restructuring tax slabs, suggesting a 30 per cent rate for incomes above Rs50 lakh and a 20-25 per cent rate for those earning between Rs15 lakh and Rs50 lakh.
Similarly, former Infosys CFO Mohandas Pai advocated a new tax structure with no tax for incomes up to Rs5 lakh, 10 per cent for Rs5-10 lakh, 20 per cent for Rs10-20 lakh, and 30 per cent for incomes above Rs20 lakh.
Finance Minister Nirmala Sitharaman will present the Union Budget on February 1.
