When we look at the Income tax history in
India, we realise how progressive we were long back even before the british.
There are references found in the works of Manu Smirthi and Arthasastra apart
from our own Thirukural.
As we stand today we have an Act of 1961 which
has in origins from 1860. To have a better perspective we need to know about a
British Statesman by name, Henry Addington, 1st Viscount Sidmouth who
was the Prime Minister from 1801 to 1804.
The tax was initially levied on Land which was
used for agriculture and the collection was in kind. Income tax was thought to
be a government instruction into the private matters. To overcome this in 1707,
when the Kingdom of Great Britain came into being, a Window tax, wherein the
tax was collected basis the number of Windows a property had was introduced.
In
1798, Income tax was levied by William Pitt the younger who was the then PM of United
Kingdom (youngest prime minister at the age of 24 and his father also had
held the office of Prime minister). The maximum rate of Tax was 10% and it
had a very short life wherein in 1802 it was abolished by Henry Addington. He
replaced Income tax with Contribution of the Profits Arising from
Property, Professions, Trades and Offices.
Why I am referring to Henry
Addington in our Income tax day?
1. Tax at source
a.
The
act recognized the requirement of Tax being deducted at Source
2. The tax liability was determined
basis various schedules of Income rather than number of windows in a property.
The act had schedules for
a.
Tax
on Land
b.
Tax
on commercial land
c.
Income
from Securities
d.
Income
from Trading, Profession, Interest, Overseas and Casual Income
e.
Tax
on employment
f.
Tax
on Dividend
The above act has the origins for
our current Income tax act. The above act has become a bench mark basis which
most of the common wealth nations have drafted their own income tax.
In India, the Income tax act was
introduced by the first Finance Minister of British-India, James Wilson in
1860. (Act XXXII of 1860). We celebrate 24th July as the Income tax
day since the assent of the Governor General was received on 24th
July 1860.
An Act for imposing duties on
Profits arising from Properties, Profession, Trades and Offices. – Act XXXII of
1860.
As
we find, the Income tax act has been updated on need basis. From being taxed
from the number of windows, the tax has been levied and collected basis the
income. However despite all the efforts, as rightly pointed out by our current
Finance Minister, India's tax to GDP ratio is very low and the proportion of DT
to IDT is not optimal from the view point of social justice".
This
only goes to indicate the Herculean task ahead of the respected staff members
of the IT dept and their significance in economic growth and social equality. The
Income Tax Department has been striving very religiously to make compliance
easier thereby expanding the tax base of our nation which is indeed the
foundation for turning India into a superpower; thereby achieving Dr. Kalam's
dream of India 2020.
With
the switchover to GST and demonetisation, the mainstream economy has got a huge
boost and I expect that the Income tax collections to grow in line with
expectations of the Income tax department. Which also means that the trade,
Industry and tax payers make more money.
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