52) Celebrating 150 years of
“Building India”/ existence of the Income Tax Department of India :
A brief history of Income Tax:
Income
Tax has been levied in some form or the other even in Primitive Tribal
communities. Several centuries ago, it was common practice to let the
buyer/seller pay in some kind on the purchase or sale of goods and merchandise
or livestock to the King or Governing Authority in some arbitrary form of
assessment or the other.
In fact
the term “Tax” is derived from the word “Taxation” which means “an estimate”,
which gave the then Tax collectors powers to arbitrarily estimate the State or
Community dues from the individual. Punishments for not paying taxes could be
confiscation of properties or even physical/corporal punishment.
One of
the first few wide-spread and formal
systems of Taxation were prevalent in Greece, Germany and the Roman Empire,
where taxes were levied on sales/purchases and properties ,incomes from
occupations of citizens of both Rome, as
well as Occupied Territories. These taxes went a long way in meeting the civil
and military/occupation forces expenditure like , administration of justice and
infrastructure (roads, schools, public places etc.) and other State functions. Custom duties were also levied as ‘duties’
on goods and items both produced within the State/city or exported outside.
Some recorded International attempts at
imposing Income tax over the centuries which met with resentment:
Augustus
Ceaser is said to have issued a decree to the effect that “the entire World”
(or at least that governed by him) should be taxed which led to wide-spread
resentment in Roman Empire -occupied territories.
In 10CE,
the Chinese Emperor Wang Mang of the Xin (Han) Dynasty imposed income tax at
10% of profits for Professional and skilled labour. His action was thoroughly
unpopular and he was overthrown about a decade later primarily on this account.
In
Britain, William Pitt, the Younger, in 1798 levied an income tax for military
preparations against Napoleon, the Emperor of France. Against an estimate of
GBP 10 million, he managed to collect GBP 6 million. The tax proved to be very
unpopular and had to be repealed in 1816 and copies its records publicly burnt
by the Chancellor of the Exchequer to allay the public’s resentment.
To pay
for the American Civil war effort, the US Government imposed a personal income
tax in 1861 (3% of all incomes over US $800). This Act, too, was very unpopular
and was repealed in 1862, but the Government brought in another series of
Income tax.
In
India, we are having an “Educational Cess” charged at 3% on payable income tax
calculated on aggregate personal incomes in a financial year and several other categories
of income. (Although, we do not see much improvement in the number of
“literate” citizens in India, nevertheless, I will refrain from commenting on
this “tax”, lest, my comment should fall on the wrong side of the I.T.
Authorities. (:-)
Manu,
the ancient Indian sage and Law-maker:
In
India, too, the system of Taxation finds a mention in the “Manu Smriti” (Sage
Manu’s Doctrine) and “Arthshastra” (Economic Science) , which stated that the
King could levy taxes according to the Shastras (oral or written
texts/doctrines). He was however, in favour of judicious taxation, so that the
citizens paying taxes did not feel the burden of taxation unbearable.
The taxes proposed by Manu were 20% of profits
for artisans and traders progressively reducing to 10% in the case of
Agriculturists. The method of paying
taxes in the ancient India was also very interesting. Taxes were paid in gold coins, cattle,
food-grains, raw materials and by rendering personal service to the State.
(Indeed,
the present policies of the Government of India are more or less in tune with
these recommendations of sage Manu several centuries ago. Today, upto Rs.10.00 lacs all income earners
are taxed at 10% approx., with Agricultural income and several different
categories enjoying substantial exemptions).
Chanakya (or Kautilya or Vishnu
Gupta):
Chanakya (370-283 BCE) was the teacher of
Chandragupta Maurya, the first Emperor in Indian recorded history to rule the
complete Indian sub-continent. Chanakya is also known as “Kautilya” or
“Vishnugupta”.Two voluminous/exhaustive compilations are attributed to him in managing
the affairs of the Mauryan Kingdom viz., the “Arthshastra” and the
“Neetishastra”. While the Arthshastra discusses the monetary and fiscal
policies, inter alia, welfare, international relations and war strategies and
levies in detail, the Neetishastra is a treatise on the “ideal way of life”
both for citizens and Kings (including the dos and don’ts of running a
kingdom/State). A famous quote which is attributed to Chanakya is “Ideally,
Governments/States/Kings should collect taxes like a honey-bee which sucks the
right amount of nectar from the flower, so that both the bee and the flower can
survive”.
Kautilya’s
Arthshastra, written at the height of the Mauryan Empire, is a well founded
treatise dealing with the system of Taxation. A few examples of his work would
be of interest.
For
example, he suggested that if the King/State failed to implement judicious
taxation on the citizens, they (the citizens) had the right to stop paying
taxes and to even demand refund of the taxes paid. (I wonder whether this is
possible to follow in the present day though!!).
Further,
he suggested that the King/State should collect a part of the Agricultural
produce, say 1/6th as tax and also levy water taxes, octroi duties,
toll and custom duties etc. He also included items like forest produce and Salt
for taxation purposes. (In keeping with his “honey-bee and lotus flower”
policy)
Foreign
goods imported from other countries like China, Ceylon (present day Sri Lanka)
were subjected to an import levy called “Vartanam”. Also, the importing
businessman paid another levy called “Dvarodaya”. His discussions on rates of taxation, personal
income tax, Profit tax, Sales Tax, Gambling tax, liquor tax, Property tax,
pilgrimage tax (yatravetana) etc. are very detailed and comprehensive.
Certain exemptions
from taxes were granted to several items like – items purchased for marriages,
sacrificial ceremonies and special kind of gifts. He laid down that during war
or emergencies like famines or floods, taxation would be more stringent and the
King could also raise war loans and increase land revenue.
Chanakya’s relevance – Present day
Indian
Authorities/historians hold that Kautilya’s Arthshastra was the first
Authoritative text on public finance, administration and fiscal laws in India. Chanakya
is considered to be the pioneer of the field of Economics and Political Science
and his works are taken as precursors to Classical Economics. Europe and the
West refer to him as the “Hindu Machiavelli” although Chanakya’s works predate
Machiavelli’s by over 1800 years. It would, therefore, be more appropriate to
call Machiavelli “The Western Chanakya”.
Historical development of Modern Day
taxation in India
·
In
1860, the first Income Tax Act for the first time was enforced by the British
India Government for a period of five years and the Act lapsed /became
redundant in 1865 and was formally abolished in 1873. The Act was primarily
meant to recover the British Government’s military expenses incurred during
India’s First War of Independence fought in 1857.
·
However,
in 1877, the Government re-introduced Income Tax primarily on account of the Great
Famine of 1876.
·
In
1886, an improved version of the earlier Act was enacted. This Act defined
Agricultural income and granted exemption to income from Agriculture for the
first time, which exemption in various forms has continued till the present
day.
·
In
1918, another Act was put in place which was quite comprehensive and recast the
entire tax laws, covering areas like aggregation of income from various sources
for the determination of the Rate-slab, classification of income under 6 heads
and covering all incomes which were generated within India or were received in
India from any source in British India.
·
In
1922, an Act termed as Act VII came into force on the recommendations of the
All India Income Tax Committee which is considered a milestone in the evolution
of Direct Tax Rules in India. The salient feature of this Act was that it
shifted the administration of Income Tax from the State/Provincial Governments
to the Central Government. This Act also left the “Rates of Taxation” to be
announced by the Finance Acts every year, a provision which has survived to the
present day.
·
In
1961, (the first time since Indian Independence) the Act of 1922 was modified, based
on the recommendations of a Commission set up in 1956, which recast the
Taxation structure on logical lines without changing the basic frame-work.The
basic provisions contained in this Act are followed to the present Day.
·
With
various policy reforms, the stress of the Income Tax Authority is on lowering
of tax rates, simplifying the tax laws and widening the Tax base.
·
The
Administrative reforms have included - introduction of PAN /TAN numbers for
easier identification of tax payers, work on a Unique Identification number
(UID) to tax-payers and computerization of all tax related work. Today with the
Income Tax returns being filed online and Tax refunds coming directly to
Individual’s accounts, the Tax administration is striving to achieve optimum
levels of efficiency in Tax collection and eligible refunds and service to
tax-payers.
Commemorative coin issues by RBI:
To
commemorate the 150th Anniversary of the existence of the Income Tax
Department/ infrastructure in India and
its contribution to the development of India,the Reserve Bank of India has
brought out a Commemorative coin in the denomination of five rupees for general
circulation.
The
obverse of the coin shows the Lion Capital of the Asoka Pillar with the legend
“Satyameva Jayate “(Truth Always Prevails ) inscribed below it. On the left
flank are the words” Bharat” and “Rupiye” in Hindi and on the right flank are
the words “India” and “Rupees”. Below the Lion Capital is the denomination of
the coin “5” in International numeral.
The
reverse of the coin has an image of Chanakya, with his name spelt out in Hindi
and English, below his portrait. To the left of his portrait is a Lotus flower
with a honey bee sipping nectar from it in keeping with his famous quote
mentioned above on the section on Chanakya in this post . On the periphery are
the words” Aaykar – Bharat Nirman Ke 150 Varsh” in Hindi and “Income Tax – 150
years of building India” in English. The years of existence of the Modern
Income Tax institutions in India 1850-2010 are mentioned at the bottom of the
coin. This coin is issued at the Mumbai mint. Notice the “diamond” mint mark
over the I.T. years. (Issued in 2011?)
The
shape of this coin is circular and outer diameter is 23mm. The number of
serrations on the side are 100 and metal composition is (Nickel Brass – Copper
75%, Zinc 20% and Nickel 5%).
In
addition, Commemorative coin sets (both Proof and Uncirculated) were released
by the RBI in March 2011 in the denomination of Rs.150/- (Quaternary Alloy – 50
% silver and three other metals, having an outer diameter of 44 mm) and Rs.5/-
(Cupro-nickel) which looks like the above coin.
Posted on 03.07.2012:
Yesterday,
the Proof set of coins which I had booked with the Kolkata Mint have been
delivered to me within four months of Booking – a marked improvement over the
harrowing experience mentioned in my Post “The strange Case of the missing Test
coins” . Please click on the undernoted Link to view this Post:
http://exclusivecoins.blogspot.in/2011/09/strange-case-of-missing-test-coins-bad.html
http://exclusivecoins.blogspot.in/2011/09/strange-case-of-missing-test-coins-bad.html
The two
commemorative coins are contained in a beautiful coin album mentioning” Aaykar
– Bharat Nirman Ke 150 Varsh” in Hindi and “Income Tax – 150 years of building
India” in English and showing an image
of Chanakya, with his name spelt out in Hindi and English, below his portrait.
To the left of his portrait is a Lotus flower with a honey bee sipping nectar.
The back
of the album shows a picture of the Kolkata Mint.
The
image given below is that of the reverse of the two coins, both Rs.150/- rupees
denomination and Rs.5/- denomination contained in the album:
An image
of the obverse of the two coins showing their denominatons as Rs.150/- and
Rs.5/- respectively:
The
specifications of these coins are as under:
Rs.150/- coin:
Shape:
Circular; Size: 44 mm; No. of serrations: 200; Weight: 35 gms;
Metal Composition:
Quaternary Alloy (Silver – 50%, Copper – 40%, Nickel – 5%, Zinc – 5%).
Rs.5/- coin:
Shape:
Circular; Size:23 mm; No. of serrations: 100; Weight: 6.00 gms;
Metal Composition:
Nickel Brass (Copper – 75%, Zinc – 20%).Nickel – 5%)
An interesting reading about getting the new commemorative coin set from the Govt Mint. Thanks for the information.
ReplyDeleteThanks. Kolkata mint is a very improved mint in terms of Customer service now. They are even selling commemorative coins across the counter and holding Customer Relation Workshops.
ReplyDeleteEsta ap esta muy divertida
ReplyDeleteWow
ReplyDelete