In an interview with CNBC-TV18, TV Mohandas Pai, Chairman of Aarin Capital and former CFO of Infosys, advocated for income tax relief and reforms that simplify the taxation system.
“The low-hanging fruit could be that they expand the tax slab. You need to have a system where people can get more cash in hand,” he said.
Income tax collection from individuals has surged, rising from about ₹7 lakh crores two years ago to approximately ₹10.35 lakh crores last year, with a projection of ₹13 lakh crores for FY25. However, corporate taxes, which is a crucial component of the direct tax kitty rose by only 8%. Non-corporate tax collections, which include taxes paid by individuals, surged over 21%.
Pai has called for a restructuring of the tax slabs to make them simpler and more beneficial for the public.
“₹0-5 lakhs will have no tax, ₹5-10 lakh maybe 10%, ₹10-20 lakh maybe 20%, and above ₹20 lakh maybe 30%,” he proposed, adding that a surcharge should kick in only after ₹50 lakhs. He also advocated for eliminating most exemptions, with the exception of deductions for insurance and philanthropy.
Pai also stressed the importance of reducing tax disputes, which he believes is crucial for improving the ease of doing business in India. He referred to the growing number of tax disputes, which have risen from ₹4.5 lakh crores in 2014 to an alarming ₹12.5 lakh crores in 2024. “There are about 5.65 lakh cases pending at the commissioner level,” Pai pointed out, adding that such cases are stifling business growth. “It’s very important to make sure that tax harassment stops.”
Industry bodies like CII and ASSOCHAM have also echoed Pai’s sentiments, calling for a reduction in income tax rates to stimulate consumption and improve disposable income.
Below is the verbatim transcript of the interview.
Q: What is your hope from the union budget? You have made a case for relief for the middle class in terms of income tax in the union budget, what, according to you, can be the low-hanging fruit in terms of exemptions?
Pai: The low-hanging fruit could be that they expand the tax slab. Because if you look at the data, two years ago, income tax collection was about nearly ₹7 lakh crores. It went to about ₹10.35 lakh crore last year. And income tax on individuals could go up to possibly ₹13 lakh crore. This year gross tax collection is growing at 22%–24% for individual income tax and for corporate tax, gross tax collection is growing at 15%.
Earlier there was tax terrorism, and many of the cases are getting settled now, so this year till about the 11th of January, I think ₹2 lakh crore or so of corporate tax refunds have come.
I think in this budget they must expand the tax slab and make it simple: zero to five will have no tax, 5 to 10 maybe 10%, 10 to 20 maybe 20% and above 20 or 25 maybe 30% and surcharge to kick-in after ₹50 lakhs. There should be no exemption except 80D for insurance and 80G for philanthropy. Because the government is telling us, we are giving you deductions—up to about ₹7.75 lakhs or so you don’t have to pay tax, but please remember, what we want is cash in hand. We want money in the hands of people to decide what you want. They’re giving a huge deduction for housing, but out of 4 crore people who are paying income tax, I think only about 1 crore have got housing loan. The rest don’t have housing loans. So, you must have more cash in hand and simplify the entire tax slab.
So, I think by doing this, they could possibly put ₹30,000 to ₹50,000 in the hands of many people, and stop forcing people to file returns till they cross five lakhs. I think we got to simplify and give it as an option. If people want all the exemptions, let them do that. I think that is there today—we have two class of tax slabs.
We should have only three tax slabs. P Chidambaram, gave us three tax slabs long ago, it was very simple, you could remember it. But now we have five or six. We need three tax slabs which can be easy, because the biggest challenge is people need money in hand. They need cash in hand.
Q: Give us a sense of what could be the big idea in terms of reforms, ease of doing business. You’ve spoken about the need for relief for the middle class, and this is also because we’ve seen a dip in consumption, and there is a need to revive it. Many economists have already told the Prime Minister’s Office and the government about the need to do so, but about one big idea on the ease of doing business front what would that be?
Pai: One big idea on the ease of doing business front would be stop tax terrorism. In 2014, total tax disputes were about 4.5 lakh crores and Finance Minister Arun Jaitley promised us that they would stop tax terrorism, it was there in the BJP 2014 manifesto. And in 2024 the total tax disputes have gone up to about 12.5 lakh crores. And if you look at the data, I think about 5.65 lakh cases are pending at the level of the commissioner of income tax.
So, I think it’s very important to make sure that tax harassment stops. So, what they should do is, next one year, they’re not going to raise any new tax disputes and settle all the old disputes, two raise the limit of appeal to Supreme Court from ₹5 crores to ₹50 crores. So at least you respect the decision of the court and do that.
Secondly, we must have a stop to regulatory measures taken by RBI, SEBI and IRDAI and everybody else, too much of regulations have come in the last two years and liquidity in the market is constraint. RBI, specially has issued regulations without consulting people and stopping business. So, for next one year they should not issue any regulations. And the third thing is calling upon CBI, Income Tax and ED to make sure they go to court for all the cases they opened in 6-12 months. About 55,000 HNIs have left this country in the last 10 years because of tax, terrorism, decline in the quality of life here etc. I think these are the biggest thing that could happen for ease of doing business.
