
Former IMF Executive Director Surjit Bhalla has urged the government to prioritize cutting personal income taxes in the upcoming Union Budget 2025. In an interview with NDTV, Bhalla made a strong case for reducing taxes on individuals rather than offering further relief to corporations.
Bhalla criticized India’s current tax system, stating that personal taxes are “too high” and should be the focus of change. He explained that while some international voices call for cuts in corporate taxes, such tax breaks mainly benefit large corporations, not ordinary citizens. “We the people need a tax cut,” Bhalla emphasized, urging for a shift in focus from corporate tax relief to reducing personal income tax rates.
The economist also raised concerns about India’s tax burden, which he believes is disproportionately high compared to other countries. He pointed out that India’s tax-to-GDP ratio is 19%, significantly higher than the 14.5% average in East Asia. Bhalla questioned why India, with a much lower per capita income compared to countries like the US and Korea, has a similar tax-to-GDP ratio.
Bhalla further argued that cutting personal income taxes could actually lead to an increase in government revenue. He shared his experience working on corporate tax cuts in 2019, explaining that lower taxes could encourage greater compliance among taxpayers. “Cut tax rates, and your revenue goes up,” he said, suggesting that these savings could be reinvested in infrastructure and welfare programs.
Bhalla also dismissed the idea of additional corporate tax cuts, noting that the 2019 reduction had already been “hugely successful.” Instead, he called for tax cuts for individuals, which he believes would increase disposable income, boost consumption, and drive economic growth.
When questioned about potential funding gaps that could arise from tax cuts, Bhalla responded, “Other countries face funding problems too. How do they solve it?” He argued that tax cuts should be viewed as an investment in economic growth, which could ultimately generate more revenue in the long term.
The calls for tax reform come as other business leaders have also proposed changes to India’s personal income tax system. Confederation of Indian Industry (CII) President Sanjiv Puri recently suggested tax cuts for individuals earning up to ₹20 lakh annually to boost consumption and revenue. Similarly, PHDCCI CEO Ranjeet Mehta recommended restructuring the tax slabs, proposing a 30% rate for incomes above ₹50 lakh and a 20-25% rate for those earning between ₹15 lakh and ₹50 lakh. Former Infosys CFO Mohandas Pai also advocated for a revised tax structure, with no tax on incomes up to ₹5 lakh, 10% for ₹5-10 lakh, 20% for ₹10-20 lakh, and 30% for incomes above ₹20 lakh.
With Finance Minister Nirmala Sitharaman set to present the Union Budget on February 1, 2025, the debate over tax cuts is expected to remain a key topic in the coming weeks.