The first law of income tax in the country came 160 years ago. The first budget was presented in 1860 by British officer James Wilson. Income tax law was added to this. In the first budget of the country, income tax rebate was given to those earning up to 200 rupees annually. The Income Tax Act of 1961 is currently in force in the country. It is amended from time to time.
In 1860, the tax was levied on the earning of more than 200 rupees,
in the first budget of the country, there was a provision of tax on the annual income of Rs 200 to 500 rupees. A provision was made to levy 2% tax on those earning more than Rs 200 annually and 4% on those earning more than Rs 500. Army, Navy and police employees were exempted from income tax law. However, most of the workers at that time were British. The annual salary of an army captain was Rs 4,980 and that of a naval lieutenant was Rs 2,100. However, the income tax law was strongly opposed at that time. The then Governor of Madras Province, Sir Charles Tavelian, also protested. Wilson’s law was similar to Britain’s income tax law. In Britain in 1798, the then Prime Minister William Pitt also enacted an income tax law to cover the expenditure of the army.
The British Government began to rule in India in 1858, the
East India Company was ruled in India in 1857. Indian soldiers revolted against the British. This sparked agitation across the country. To deal with this, the British increased their army’s expenses by a significant amount. In 1856–57, the British had spent £ 14 million on the army. In 1857-58, this expenditure was increased to £ 2 million. At that time 1 pound was equal to 10 rupees. On November 1, 1858, the then Queen Victoria of Britain announced that now the British government would rule India. At the same time, ‘The Government of India Act 1858’ came. According to the provisions of this law, control of all economic affairs of India came into the hands of the first Secretary of State, Charles Wood.
If the British suffered a loss in
the revolution of 1857 , then the imposition of income tax , the debt of England reached 185 million pounds in 1859 due to the revolution of 1857. Britain sent James Wilson to India in November 1859 to deal with this problem. Wilson was the founder and economist of the Chartered Standard Bank of Britain. He was made Finance Member (Finance Minister) in the Council of Viceroy Lord Canning in India. Wilson presented India’s first budget on 18 February 1860. In the very first budget, for the first time three taxes were proposed. First- income tax, second- license tax and third- tobacco tax. While announcing these three taxes, Wilson gave an example of Manusmriti, saying that his move is not ‘Indian’ but ‘Indian’ only.
James Wilson , the founder of The Economist magazine, was born on 3 June 1805 in the Hoick village of Rockshire Parganas in Scotland. James was the fourth of 15 children of his parents. James was born in poverty. James and his younger brother William then started a hat-making business that was initially successful. The two brothers later started work in London, but could not last long and had to shut down the company. James then started ‘The Economist’ magazine and became its editor-writer. In 1844 James invested all his earnings in The Economist. ‘The Economist’ is still counted among the most popular magazines in the world. In July 1860, eight months after his arrival in India, James became ill. He died on 11 August 1860 due to illness.
The new Income Tax Act came in 1922, only after it became the Income Tax Department.
- At the time of non-cooperation movement, a new income tax law came into India in 1922. At the same time, the story of development of Income Tax Department also started. The new law gave different names to the income tax authorities. For the first time in 1946, direct recruitment of Income Tax officers was done through examination. The same examination was named ‘Indian Revenue Service’ i.e. ‘IRS’ in 1953.
- Till 1963 the Income Tax Department had administrative functions like property tax, general tax, enforcement directorate. Hence the Central Board of Revenue Act came into force in 1963, under which the Central Board of Direct Taxes (CBDT) was formed.
- Till 1970, the state authorities of the department had the authority to recover the tax dues. However, in 1972 a new wing for tax collection was created and commissioners were appointed. Income tax laws change from time to time.
How much income tax changed during the era of which finance minister?
1949–50: John Mathai, the country’s first finance minister
- Income tax slabs were changed for the first time in independent India. On income up to 10 thousand rupees, one fourth of the tax was reduced. The first slab consisted of nine pies from one anna. Nine pies from two anas were taxed in the second slab. Anna used to be a currency in India before. It used to be the 16th of a rupee. It was divided into 4 paise or 12 pies. One rupee had 64 paise and 192 pies.
1974-75: YB Chavan
- There was no tax on income up to Rs 6,000. 70% tax was kept on annual income above 70 thousand rupees. The total tax including surcharge was 77%. Earlier, it used to tax up to 97.75%.
1984-85: Vishwanath Pratap Singh
- Slabs reduced from 8 to 4. Reduce tax on income from 61.87% to 50%. There was no tax on the annual earners of Rs 18,000. The tax was 25% from Rs 18,001 to Rs 25 thousand and 30% from Rs 25,001 to Rs 50,000, 40% for income from Rs 50,001 to Rs 10,000 and 50% for income above Rs 1 lakh.
1992-93: Manmohan Singh
- Slabs reduced from 4 to 3. 30,000 to 50,000 rupees was 20% tax on annual earnings. From 50,000 to 1 lakh rupees, 30% and more than one lakh rupees were taxed at 40%.
1994-95: Manmohan Singh
- Two years later adjusted the tax slabs. Rate did not change. The first slab was 35,000 to 60,000 rupees and kept 20% tax on it, 30% from 60,000 rupees to 1.2 lakh rupees and 40% tax on earning over 1.20 lakhs.
1997-98: P Chidambaram’s dream budget
- At that time 15, 30 and 40% rates were applicable. These were reduced to 10, 20 and 30%. The first slab was between 40,000 and 60,000 rupees. 60,000 to 1.5 lakh in the second slab and above Rs 1.5 lakh in the third slab. Standard deduction clause of 20 thousand rupees was inserted for the first time. People who take salary up to 75,000 rupees and give 10% in PF, will not have to pay any tax.
- Income up to Rs 1 lakh became tax-free. 10% from 1 lakh to 1.5 lakh, 20% from 1.5 lakh to 2.5 lakh and 30% tax was levied on earning above Rs 2.5 lakh.
2010-11: Pranab Mukherjee
- Income up to Rs 1.6 lakh became tax-free. 10% from 1.6 lakh to 5 lakh, 20% income from 5 lakh to 8 lakh and 30% tax on income above 8 lakh.
- Income up to 2 lakh rupees was tax free. 10% tax was levied on the income of 2 lakh to 5 lakh, 20% on the income of 5 lakh to 10 lakh and 30% on the income of more than 10 lakh.
2014-15: Arun Jaitley
- Abolished wealth tax. Surreach means surcharge of 2% on income above Rs 1 crore. People have not had to give wealth tax returns since 2016-17.
- Tax reduced from 10% to 5% on income from 2.5 lakh to 5 lakh rupees. Income up to Rs 3 lakh was not taxed due to section 87A of income tax. Lower slab reduced to 5%. There was a tax of only Rs 2,500 on 3 to 3.5 lakhs.
Income tax is also mentioned in ancient texts
- In Manusmriti it is written about the income tax that according to the scriptures, the king can levy tax. Taxes should be related to the income and expenditure of the subjects. The king should avoid taxing too much. Such a system of collection of taxes should be made so that the subjects do not feel difficulty while paying.
- Apart from Manusmriti, income tax is also mentioned in ‘Kautilya Arthashastra’ written 2300 years ago. Kautilya wrote in economics – The power of the government (king) depends on the strength of its treasury. Revenue and taxes are income for the government, which it gets to serve its people (subjects), protect and maintain law and order.