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History of Taxation in India
Tax payment is mandatory for every citizen of the country. There are two types of tax in India i.e. direct and indirect. Taxation in India is rooted in the period of Manu Smriti and Arthasastra. The present Indian tax system is based on this ancient tax system which was based on the theory of maximum social welfare.
What is taxation
Taxation is the term in which the Central and State government plays a significant role in determining the taxes in India. The process of taxation and ensure transparency in the country, the state, and central governments have undertaken various policy reforms over the last few years It refers to the practice of a government collecting money from its citizens to pay for public services. Without taxation, there would be no public libraries, parks, and other public servces.
Types of taxes in India
India has two types of taxes, namely Direct Tax and Indirect Tax. The core difference between both the taxes lies in their implementation.
Apart from these types of taxation, there are other taxes or cess levied by the government for specific purposes, which are – Krishi Kalyan Cess, Swachh Bharat Cess, and Infrastructure Cess Tax.
Direct Taxes comprise taxes that citizens pay directly to the government. These taxes are levied directly on an individual and therefore can’t be transferred to another entity or person. The Central Board of Direct Taxes (CBDT) under the Department of Revenue is responsible for the governance of this tax. There are various types of Direct Taxes, which include:
Income Tax came into force with the Income Tax Act of 1961. All the rules of income tax are set by this act. This tax will apply to any income you generate for profits, owning a property, salary, investments, or business. Besides stipulating from where income tax is to be collected, this act has provisions that allow tax benefits for taxpayers through fixed deposits and life insurance premiums. This act also determines your position on the income tax slab.
Gift Tax, wealth tax, capital gains, tax securities, Transaction Tax
Another type of Income Tax, the Corporate Tax is levied on the earning of businesses. An Indian firm whose turnover is less than Rs. 1 crore is not subject to this tax. There is a corporate tax slab according to which companies pay tax. Moreover, the tax structure for international firms is different from domestic firms.
Unlike Direct Taxes, these taxes are not levied on individuals but on goods and services. This tax is not levied on profit, income or the revenue of an individual or an entity. Also, this tax can be transferred from one person to another.
Here’s a list of various types of Indirect Taxes:
Goods and Service Tax
The Goods and Services Tax was introduced in 2017. This tax is applied at the consumption stage. GST is applied at every stage of the supply chain wherever consumption takes place.
If you buy a product from a different country and import it to India, then you have to pay tax on it. This tax is called Customs Duty.
What is CBDT?
The Central Board of Direct Taxes is a statutory authority functioning under the Central Board of Revenue Act, 1963. The officials of the Board in their ex-officio capacity also function as a Division of the Ministry dealing with matters relating to levy and collection of direct taxes. The Central Board of Revenue as the apex body of the Department, charged with the administration of taxes, came into existence as a result of the Central Board of Revenue Act, 1924. Initially, the Board was in charge of both direct and indirect taxes. However, when the administration of taxes became too unwieldy for one Board to handle, the Board was split up into two, namely the Central Board of Direct Taxes and Central Board of Excise and Customs with effect from 1.1.1964. This bifurcation was brought about by the constitution of two Boards u/s 3 of the Central Board of Revenue Act, 1963.
Who brought taxation To India?
The Tax was introduced for the first time by Sir James Wilson in 1860. The Indian Income Tax Act of 1860 was enforced to meet the losses sustained by the government on account of the military mutiny of 1857. From 1886 to 1992, there were so many amendments passed. Finally, in 1961– In consultation with the Ministry of Law finally the Income Tax Act, 1961 was passed. The Income Tax Act 1961 has been brought into force on 1 April 1962. It applies to the whole of India (including Jammu and Kashmir).
What is GST?
GST is known as the Goods and Services Tax. It is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.
Who invented income tax in India?
The first Income Tax Act was introduced in 1860. It was implied by James Wilson to overcome heavy losses suffered by the British Government due to India’s freedom movement in 1857. The Income Tax in India is divided into 3 different periods from 1860 – 1885
How did income tax started in India?
During the Civil War Congress passed the Revenue Act of 1861 which included a tax on personal incomes to help pay war expenses. … The 16th amendment, ratified in 1913, removed this objection by allowing the Federal government to tax the income of individuals without regard to the population of each State.
Brief concept of taxation in India
In India, this tax was introduced for the first time in 1860, by Sir James Wilson in order to meet the losses sustained by the Government on account of the Military Mutiny of 1857. Thereafter, several amendments were made to it from time to time. In 1886, a separate Income tax act was passed. This act remained in force up to, with various amendments from time to time. In 1918, a new income tax was passed and again it was replaced by another new act which was passed in 1922. This Act remained in force up to the assessment year 1961-62 with numerous amendments. The Income Tax Act 1961 has been brought into force on 1 April 1962. It applies to the whole of India and Sikkim(including Jammu and Kashmir). Since 1962 several amendments of far-reaching nature have been made in the Income Tax Act by the Union Budget every year.
How many Indians pay tax every year?
A total of 5.78 crore individuals filed their income tax returns for the financial year 2018-19. Out of this, 4.32 crore individuals reported income below the tax bracket. A further breakup of the number reveals that 3.16 lakh people reported an income of over Rs 50 lakh.
About Tax reforms and jiziya tax
Jizya was a tax levied by the Muslim rulers on Hindu residents of the territory in return for their protection. In India, Qutb-ud-din Aibak imposed jizya for the first time. Jizya was abolished by the Mughal ruler Akbar in the 16th century but was re-introduced by Aurangzeb in the 17th century.
Taxes in Ancient and Medival India
The concept of tax as held by Kautilya was very wide in its scope. To him, wealth included money, commodity, the acquired wealth, public or private property, precious metals, the accumulated wealth, negotiable and transferability, and the power of appropriation. The ancient sages appreciated the dignity of labor for 100 years. Manu and Kautilya have dealt with the methods for the regulation of wages and for the settlement of disputes between employers and workers.
Tax in Medival India
The khiraj or Land Revenue:
Land revenue was the major source of income. It was generally realized at 1/5 of the total produce thought the Sultans like Ala-ud-Din Khilji and Muhammed Tughlak raised it to 1/2 of the produce.
There are so many types taxes implemented Ghari ,Charah, Kharaz, Ushraf, Zakat, Jizya, Khoms, Sharab or Sharb, Tax (Revenue) Zarib
There is a need of imposing tax but it must be progressive, not regressive tax. Taking tax by the government that can do welfare for the public such as construct the railways, waterways, providing the health and education facilities at a lowest rate so that economy can be grown and farmers can be helped by providing subsidy.