Taxation in India
Taxation in India
The Indian Tax Structure is quite elaborate, with clear distinction in authority between Central, State and local governments. The taxes levied by the Central government are on income (other than tax on agriculture income which would be levied by the state government), customs duties, central excise and service tax. The State government levies Value Added Tax (VAT), sales tax in states where VAT is not applied, stamp duty, state excise, land revenue and tax on professions. Local bodies levy tax on property, octroi and for utilities like water supply, drainage etc. In the last 10 to 15 years, tax system in India has been subjected to significant reforms. The tax rates have been revised and tax laws have been modified. Since April 1, 2005 many State Governments in India have replaced the sales tax with VAT. Indian Tax Structure After Independence The period after Independence was quite challenging for the tax planners. A huge black economy set in both due to Second World War and the increase in economic activity after independence. Savings and investment were encouraged through the various taxation laws by the way of incentives. There was a need for generating huge amount of revenues to fund the economic growth of the country. The tax department took great care to plan the tax structure not only with the aspect to widen the income tax base, but also to look for alternate taxes and to eradicate tax avoidance .The department was severely tested due to the high volumes of work. Some of the prominent taxes that came into existence were:
• • • • • •
Business Profits Tax (1947) Capital Gains (1946-48 to 1956) Estate Duty (1953) Wealth Tax (1957) Expenditure Tax (1957) Gift Tax (1958)
To check the growth of black money, high denomination notes were demonetized in 1946. The Income tax Act was re modified in 1961, replacing the outdated law of 1922. Income Tax Structure Post Liberalization The wave of tax reforms which started across the world in the
The Indian Tax Structure is quite elaborate, with clear distinction in authority between Central, State and local governments. The taxes levied by the Central government are on income (other than tax on agriculture income which would be levied by the state government), customs duties, central excise and service tax. The State government levies Value Added Tax (VAT), sales tax in states where VAT is not applied, stamp duty, state excise, land revenue and tax on professions. Local bodies levy tax on property, octroi and for utilities like water supply, drainage etc. In the last 10 to 15 years, tax system in India has been subjected to significant reforms. The tax rates have been revised and tax laws have been modified. Since April 1, 2005 many State Governments in India have replaced the sales tax with VAT. Indian Tax Structure After Independence The period after Independence was quite challenging for the tax planners. A huge black economy set in both due to Second World War and the increase in economic activity after independence. Savings and investment were encouraged through the various taxation laws by the way of incentives. There was a need for generating huge amount of revenues to fund the economic growth of the country. The tax department took great care to plan the tax structure not only with the aspect to widen the income tax base, but also to look for alternate taxes and to eradicate tax avoidance .The department was severely tested due to the high volumes of work. Some of the prominent taxes that came into existence were:
• • • • • •
Business Profits Tax (1947) Capital Gains (1946-48 to 1956) Estate Duty (1953) Wealth Tax (1957) Expenditure Tax (1957) Gift Tax (1958)
To check the growth of black money, high denomination notes were demonetized in 1946. The Income tax Act was re modified in 1961, replacing the outdated law of 1922. Income Tax Structure Post Liberalization The wave of tax reforms which started across the world in the