Tax collection in India one of the highest, reduce direct tax to 25 pc from 40 pc: Surjit Bhalla


While India is not the richest country in the world, the tax collection here is one of the highest and the income tax rate should be reduced to 25 per cent from around 40 per cent at present, eminent economist Surjit Bhalla said.

While speaking to PTI, Bhalla said reduction in tax rate is required to accelerate the pace of economic growth.

“We are a much more globalised economy in the world and the world is a lot more globalised. If you look at the overall tax rate structure in India, collection of taxes is one of the highest in the world and we are not the richest economy of the world,” Bhalla said.

Also read: New Tax Regime: Exemption limit rises, here’s how it will work for private sector employees

He said that tax collection by state, Centre and local bodies is around 19 per cent of India’s GDP.

“We should move towards reducing it by 2 percentage points. As far as direct taxes are concerned, I think the overall tax rate should not be more than 25 per cent. Right now it is close to 40 with surcharges etc. 25 per cent, which is our corporate tax rate, that’s what our income tax rate should be,” Bhalla said.

Currently, the highest income tax rate in India stands at 39 per cent. The Budget 2023-24 had lowered India’s highest rate of income tax from 42.74 per cent, by reducing the surcharge applicable on high net-worth individuals.

Bhalla said that taxes need to come down for all and not just benefit a select section of the society.

India’s gross direct tax collection during the last fiscal ended March 2023 grew over 20 per cent to Rs 19.68 lakh crore.

This includes gross corporate tax collection growth of 16.91 per cent at over Rs 10.04 lakh crore. Gross personal I-T collection jumped 24.23 per cent to over Rs 9.60 lakh crore.

Also read: I-T returns: Norms notified for compulsory scrutiny

Bhalla said direct tax is one of the areas where there is a lot of bureaucratic involvement and it should be a lot more streamlined to minimise tax evasion.

“You cannot minimise tax evasion without doing something about very very high rates of income taxation. We need to change the tax structure so that everyone benefits rather than some selected sectors,” he said.


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