Former IMF Executive Director Surjit Bhalla has called for a cut in personal taxes ahead of the Union Budget 2025. Bhalla made a clear case for prioritising personal income tax cuts over corporate tax relief. “First, change our FDI policy. Second, cut personal income tax rates. The taxes are too high. 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 said in an interview with NDTV.
Bhalla criticised India’s overall tax burden, pointing to the country’s tax-to-GDP ratio of 19%, which far exceeds the 14.5% average in East Asia. “We are overtaxing our people to an extent not known in any other country,” he remarked. He questioned why India, with a per capita income far lower than the US or Korea, has a similar tax-to-GDP ratio.
The economist argued that cutting personal income taxes would 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. So, if you cut tax rates, your revenue actually goes up. So, please cut taxes so you can fund more infrastructure, so that you can have more welfare payments. Raising taxes won’t achieve that. Cut personal income taxes, allow FDI to come in—win, win, win,” he said.
Bhalla dismissed calls for another round of corporate tax reductions, noting that the 2019 corporate tax cuts had already been “hugely successful.” He explained that reducing personal income taxes, not corporate taxes, is now critical to boosting consumption, increasing disposable income, and driving economic growth.
Responding to concerns that tax cuts could create funding gaps, Bhalla said, “You think other countries don’t face funding problems? Everybody faces them. How do they solve it?"
Earlier this month, Confederation of Indian Industry (CII) President Sanjiv Puri suggested tax cuts for individuals earning up to ₹20 lakh annually to boost consumption and increase revenues.
Similarly, PHDCCI CEO Ranjeet Mehta recommended restructuring 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 pushed for revised tax slabs, advocating 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 will present the budget on February 1.