The Income Tax history in modern India dates back to 1860. In this year
first Income Tax Act was introduced and which remained in force for a
period of 5 years. This Act lapsed in 1865. Thereafter Act-II of 1886
was in force. This Act of 1886 was the improved version. It introduced
the definition of agricultural income and the exemption it granted in
respect of agricultural income has continued to be a feature of all
subsequent legislations.
The year 1918 saw the introduction of Act VII of 1918, it recasted the
entire tax laws. This Act was designed keeping in mind the remedy to
certain inequalities in the assessment of individual tax payers under
the 1886 Act. The Act introduced the scheme of aggregating income from
all sources for the purpose of determining the rate of tax.
The Indian Income Tax Act, 1922 which came into being as a result of
the recommendations of the All India Income Tax Committee is a milestone
in the evolution of Direct Tax Laws in India. Its importance lies in the
fact that the administration of the Income Tax hitherto carried on by
the Provincial Governments came to be vested in the Central Government.
The Act of 1922, similar to the Act of 1918, applied to all incomes "accruing
or arising", or received in British India, or deemed to be accrued,
arisen or received. This Act marked an important change from the Act of
1918 by establishing the charge in the year of assessment on the income
of the previous year instead of merely adopting the previous year's
income as a measure of income of the year of assessment.
The Act made a departure by abandoning the system of specifying the
rates of taxation in its own Schedules. It left the rates to be
announced by the Finance Acts, a feature which survives to this day. It
also enabled loss under one head of income to be set-off against profits
under any other head, so that the tax was chargeable only on net income.
The Act of 1922 remained in force till the year 1961. In 1956 the
Government had referred the Act to the Law Commission to recast it on
logical lines and to make it simple without changing the basic tax
structure. The present Income Tax Act is the Act of Sept., 1961.
Income Tax Timeline in India
| 1860 |
1860
Introduced for the first time for a period of five years to cover
the 1857 mutiny expenses. It was abolished in 1873. |
| 1877 |
1877
The tax system was revived as a result of the Great Famine of 1876. |
| 1886 |
1886
Introduced as Act II of 1886. It laid down the basic scheme of
income tax that continues till the present day. |
| 1918 |
1918
Introduced as Act VII of 1918. It had features like aggregation of
income from various sources for the determination of the rate,
classification of income under six heads and application of the Act
to all income that accrued or arose or was received in India from
whatever source in British India. |
| 1922 |
1922
On the recommendations of the All-India Income Tax Committee, the
father of the present act was introduced. The central government was
vested with the power to administer the tax. |
| 1961 |
1961
The Act came into force from 1 April 1962, it extended to the whole
of India. |
| 1997 |
1997
Establishment of the Tax Reform Committee under the chairmanship of
Dr. Raja J. Chelliah. It was followed by restructuring the income
tax with parameters like lower taxes, fewer slabs, higher
execptions, etc. |
| 2003 |
The
Kelkar Task Force, which was followed by outsourcing of PAN/TAN,
exemption of dividend income, compensated by levy of the dividend
distributed tax to be paid by the company. |
Income Tax Rates Across the World
| Country |
Personal
Income Tax Rate |
| Australia |
0% - 48.5% |
| Canada |
16% - 29% |
| Estonia |
24% - 24% |
| Denmark |
44% - 63% |
| Hong Kong |
0% - 33% |
| India |
0% - 33% |
| Israel |
10% - 49% |
| Malaysia |
0% - 29% |
| Mexico |
3% - 32% |
| Russia |
13% - 13% |
| Singapore |
0% - 22% |
| UK |
0% - 40% |
| US |
10% -35% |
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