Economist Bhalla calls for reduction in direct


Though India is not the richest country, it has the highest tax collection in the world which needs to rationalise to minimise tax evasion

Income Tax, Dividend income, Capital gains
India’s direct taxes need to be rationalised

India may not be the richest country in the world, but the tax collection here is one of the highest in the world and the income tax rate should be reduced to 25 per cent from around 40 per cent at present. The advice has come from none other than Surjit Bhalla.

In an interview with PTI, eminent economist said that 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: Net direct tax collection ₹ 13.73 lakh crore so far, up by 17%

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


At present, the highest income tax rate in India stands at 39 per cent. The Budget 2023-24 had lowered the highest rate of income tax from 42.74 per cent, by reducing the surcharge applicable to high net-worth individuals.
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 a growth of 16.91 per cent in gross corporate tax collection at over Rs 10.04 lakh crore. Gross personal I-T collection also witnessed a 24.23 per cent growth to over Rs 9.60 lakh crore.

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

(With agency inputs)

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