Former RBI Governor C Rangarajan Pushes for State Income Tax to Boost Revenue

Former Reserve Bank of India (RBI) Governor C. Rangarajan has advocated for the introduction of a state-level income tax to augment revenue generation. He suggests that allowing states to levy their own income taxes could provide them with greater fiscal autonomy and reduce dependence on central allocations. This proposal aims to empower states financially, enabling them to address region-specific developmental needs more effectively.However, the implementation of such a tax would require careful consideration of potential challenges, including tax administration complexities and the risk of increased tax burden on citizens. The proposal has sparked a debate among policymakers and economists regarding its feasibility and impact on the federal fiscal structure. Further discussions and studies are anticipated to assess the practicality of this approach in strengthening state finances.​