In India, the system of direct taxation as it is known today has been in force in one form or another even from ancient times. In this article, we are discussing how the Income Tax evolved over the time in India.
1860: The Tax was introduced for the first time by Sir James Wilson. India's First 'Union Budget' Introduced by the Pre-independence finance minister, James Wilson on 7 April 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. Income was divided into four schedules taxed separately:
(1) Income from landed property;
(2) Income from professions and trades;
(3) Income from Securities;
(4) Income from Salaries and pensions.
Time to time this act was replaced by several license taxes.
1886: Separate Income tax act was passed. This act remained in force up to, with various amendments from time to time. Under the Indian Income Tax Act of 1886, income was divided into four schedules taxed separately:
(1) Salaries, pensions or gratuities;
(2) Net profits of companies;
(3) Interests on the securities of the Government of India;
(4) Other sources of income.
1918: A new income tax was passed. The Indian Income Tax Act of 1918 repealed the Indian Income Tax Act of 1886 and introduced several important changes.
1922: Again it was replaced by another new act which was passed in 1922. The organizational history of the Income-tax Department starts in the year 1922. The Income-tax Act, 1922, gave, for the first time, a specific nomenclature to various Income-tax authorities. The Income Tax Act of 1922 remained in force until the year 1961.
The Income Tax Act of 1922 had become very complicated on account of innumerable amendments. The Government of India, therefore, referred it to the law commission in1956 with a view to simplify and prevent the evasion of tax.
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 with effect from 1 April 1962.It applies to the whole of India (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 which also contains Finance Bill. After it is passed by both the houses of Parliament and receives the assent of the President of India, it becomes the Finance act.
At present, there are five heads of Income:
(1) Income from Salary;
(2) Income from House Property;
(3) Income from Profits and Gains of Business or Profession;
(4) Income from Capital Gains;
(5) Income from Other Sources.
There are XXIII Chapters, 298 Sections and Fourteen Schedules in the Income Tax Act.
CAclubindia
