Ahead of the Union Budget 2025, former IMF Executive Director Surjit Bhalla has called for a reduction in personal income taxes, arguing that the current tax burden on individuals in India is excessive. Bhalla stressed that personal tax cuts should take precedence over corporate tax relief to address pressing economic concerns.
Speaking in an interview with NDTV, Bhalla stated, “Our FDI policy needs reform, and personal income taxes must be reduced. Taxes are too high. Cutting corporate taxes won’t benefit the average citizen; it benefits corporates, who are the least in need of relief. The real focus should be on reducing taxes for the people.”
Highlighting the nation’s tax-to-GDP ratio of 19%, which surpasses the 14.5% average in East Asia, Bhalla criticised the disproportionate tax burden on individuals. He questioned why a country with significantly lower per capita income than nations like the US or Korea maintains a comparable tax-to-GDP ratio.
The economist argued that lowering personal tax rates could paradoxically increase revenue. “When corporate tax cuts were implemented in 2019, they proved highly successful. Similarly, reducing personal taxes could enhance compliance and spur economic growth by increasing disposable income, boosting consumption, and funding infrastructure and welfare programmes,” he explained.
Bhalla dismissed the need for additional corporate tax reductions, emphasising that the 2019 cuts were sufficient. He underscored the importance of prioritising tax relief for individuals to stimulate economic activity.
Other prominent voices have echoed Bhalla’s sentiments. Confederation of Indian Industry (CII) President Sanjiv Puri recently advocated for tax cuts for individuals earning up to ₹20 lakh annually. Similarly, PHDCCI CEO Ranjeet Mehta proposed restructuring tax slabs, including a 30% rate for incomes above ₹50 lakh and 20-25% for those earning ₹15-50 lakh.
Former Infosys CFO Mohandas Pai also recommended no tax for incomes up to ₹5 lakh, 10% for ₹5-10 lakh, 20% for ₹10-20 lakh, and 30% for incomes above ₹20 lakh.
Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget on February 1. The government’s stance on these recommendations remains to be seen, as public expectations for tax reforms continue to grow.
