Mohandas Pai, the former CFO and Board Member of Infosys, has called for significant tax reforms in the upcoming Union Budget 2025. Addressing Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, Pai emphasized the urgent need to provide relief to middle-class taxpayers, whom he described as "long-suffering" due to high taxes, inflation, and stagnant income growth.
Middle-Class Struggles Highlighted
In a social media post, Pai pointed out that middle-class taxpayers have been disproportionately impacted in recent years. He noted that while the government’s income tax collections have soared—from ₹4.87 lakh crore in 2020-21 to an estimated ₹12.5 lakh crore in 2024-25—the middle class has seen a decline in disposable income. Factors such as high taxes, rising education costs, and inflation have exacerbated the financial strain on this segment. Pai stated, “Middle-class IT payers are seeing much lower cash to spend due to high taxes, inflation, very high school and college fees, and lower increases in income.”
Proposal for New Tax Slabs
To alleviate the burden on the middle class, Pai recommended revising the tax structure. He proposed:
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No tax on income up to ₹5 lakh
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10% tax for ₹5–10 lakh income
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20% tax for ₹10–20 lakh income
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30% tax for income above ₹20 lakh
For senior citizens, he suggested:
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No tax on income up to ₹7.5 lakh for those above 60 years
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No tax on income up to ₹10 lakh for those above 70 years
Additionally, Pai proposed an optional simplified scheme with limited deductions (only Sections 80D and 80G) to replace the existing complex tax structure.
Focus on Housing Loan Benefits
Highlighting the issue of housing loan deductions, Pai noted that only 1.2 crore out of 3.5 crore taxpayers benefit from these provisions. He argued that providing middle-class taxpayers with more disposable income would not only boost consumer spending but also improve business compliance.
“Today, deduction for housing loans is big, but only 1.2 crore taxpayers can avail of it. People need more money to spend. This will increase compliance from businesses too,” Pai explained.
Appeal to Resolve Tax Disputes
Pai also urged the government to tackle the backlog of unresolved tax disputes, which currently amount to ₹12.5 lakh crore—up from ₹4.5 lakh crore in 2014. He suggested designating 2025-26 as the "Year of Tax Dispute Resolution" and focusing solely on clearing existing disputes.
“Stop tax terrorism as promised in 2014. Over 70% of disputes are lost in appeals, indicating inefficiency and bad assessments. Officials responsible for repeated losses in court must be held accountable,” Pai asserted.
The Importance of Middle-Class Support
Pai emphasized that middle-class taxpayers are not just economic contributors but the backbone of the nation. He urged the government to acknowledge their struggles and implement policies that balance affordability with opportunities for growth.
“Middle-class taxpayers are your long-term voters and supporters who have suffered immensely. They deserve relief,” Pai wrote in his appeal to the Prime Minister.
Conclusion
Mohandas Pai’s comprehensive recommendations for Union Budget 2025 highlight the critical need for tax reforms to alleviate the financial burden on middle-class taxpayers. By revising tax slabs, simplifying structures, and resolving disputes, the government can ensure greater financial freedom for this vital segment of society, fostering economic growth and stability.