LawPage

Notes and Articles for Law students

User Tools

Site Tools


tax_laws:personal-income-taxation--performance--reforms-and-incentives-2572021

Personal Income Taxation: Performance, Reforms and Incentives

Income tax is a universal tax form in India. It is seen almost everywhere and is the most talked about. Income tax is tax levied on personal income. It is a major source of revenue for central or union government. Along with traditional activities such as defense, law and order, India is a social state, the government should also look after social and development services, including health, education, rural development, etc. the functions performed by it. All of these activities need to be funded in a public way. Taxes are an important form of government subsidy generated by the use of public funds” “Income tax has two categories namely, Personal Income Tax and Corporate Income Tax. Income tax is levied on the income of individuals and businesses. Company Income Tax is used for business income revenue. Both types of income tax are received by the central government under Article 366 and under schedule seven entry 82 and the inclusion of 85 on the Union list” “The most important form of taxation is Income Tax and due to the ongoing taxation and exclusionary provisions, Income Tax in India satisfies the provisions of a sound tax system and serves many social and economic objectives. In addition, the ongoing tax rate also serves the purpose of distribution equity by placing higher tax rates on a richer section of society” Income “tax has played a very important role in taxation and economic development where the majority of political leaders rely on certain tax incomes based on personal income”

“Tax reform is the process by which different levels of taxation are made to make changes, as well as changing times. The purpose of tax reform is to improve tax administration and the economic and social benefits of the people. Tax conversion refers to the increase or decrease in tax rates, tax brackets or tax exemptions. It includes changes in the tax base, the introduction of new taxes and the abolition of old taxes. In short, it can be said that tax conversion is a process of changing the tax system or tax. The overarching goal of tax reform is to bring about justice and tax progress that makes the tax system more efficient, understandable and accountable”

“Taxes have been part of the Indian economy for a long time. Evidence has shown the existence of a tax on money in ancient times. Ancient manuscripts including the Bible, Manusmriti and Kautilya's Arthashastra. In India, income tax was introduced for the first time in 1860 in order to overcome the 1857 financial crisis. Currently, it is the Income Tax Act, 1961 that currently applies to India” Income tax is a universal tax form in India. It is seen almost everywhere and is the most talked about. Income tax is tax levied on personal income. It is a major source of revenue for central or union government. Along with traditional activities such as defense, law and order, India is a social state, the government should also look after social and development services, including health, education, rural development, etc. the functions performed by it. All of these activities need to be funded in a public way. Taxes are an important form of government subsidy generated by the use of public funds” “Income tax has two categories namely, Personal Income Tax and Corporate Income Tax. Income tax is levied on the income of individuals and businesses. Company Income Tax is used for business income revenue. Both types of income tax are received by the central government under Article 366 and under schedule seven entry 82 and the inclusion of 85 on the Union list”

“The most important form of taxation is Income Tax and due to the ongoing taxation and exclusionary provisions, Income Tax in India satisfies the provisions of a sound tax system and serves many social and economic objectives. In addition, the ongoing tax rate also serves the purpose of distribution equity by placing higher tax rates on a richer section of society” Income “tax has played a very important role in taxation and economic development where the majority of political leaders rely on certain tax incomes based on personal income”

“Tax reform is the process by which different levels of taxation are made to make changes, as well as changing times. The purpose of tax reform is to improve tax administration and the economic and social benefits of the people. Tax conversion refers to the increase or decrease in tax rates, tax brackets or tax exemptions. It includes changes in the tax base, the introduction of new taxes and the abolition of old taxes. In short, it can be said that tax conversion is a process of changing the tax system or tax. The overarching goal of tax reform is to bring about justice and tax progress that makes the tax system more efficient, understandable and accountable”

“Taxes have been part of the Indian economy for a long time. Evidence has shown the existence of a tax on money in ancient times. Ancient manuscripts including the Bible, Manusmriti and Kautilya's Arthashastra. In India, income tax was introduced for the first time in 1860 in order to overcome the 1857 financial crisis. Currently, it is the Income Tax Act, 1961 that currently applies to India”

Personal Income taxation in India

The reason “behind the personal tax in India is to tax a person according to his ability to pay. Most of the growing and established economies follow this principle of equality and non-discrimination. In addition, taxes levied on personal income also depend on the performance of the economy over a period of time. In India, a progressive tax structure is being pursued, where, as income rises, so does income tax. On the other hand, lower income leads to lower tax rates”

“In addition to the many principles of equity, there were also many shortcomings, based on low tax rates, tax restrictions and low compliance and high compliance costs. In addition, the contribution of personal taxes in India is very small and almost negligible compared to other developed nations”

A timeline of tax reforms

From 1860 to 1886

Income “tax was first introduced in India in 1860 after the government faced financial difficulties after 1857. Various studies were conducted between 1860 and 1886 in relation to income tax. About 23 actions were taken in relation to Direct Tax. The division into taxes in 1860 was determined at the rate of 2 per cent applicable to income earned between Rs. 200 to Rs. 500 and more Rs. 500, the rate was adjusted by 4 percent. Exemptions were granted to all government property and to those earning less than Rs. 200. In addition, the exemption category included landowners, under Rs. A total of 600 rents collected annually, as well as religious and charitable institutions. The term 'income tax' was replaced by 'license tax' in 1867, converted to 'tax certificate' in 1868 and 'General Income Tax' in 1869 and abolished in” 1873.

The Act of 1886

“This was the first law on income tax in India. There are still various aspects of this practice that continue to this day in the current income tax laws. The striking feature of the law was that it did not include “agricultural income” in taxes, which included categories such as “income from pensions and pensions”, “corporate profits”, “security interest”, and “household income”. Tax rates are divided by the rate of four pies from Rs. 500 to Rs. 2000 and above Rs. 2000 was 5 pies” In 1916, “a system of gradual taxation was introduced in parallel with the current pricing system in terms of input slabs. With the outbreak of a single world war, which led to a resource crisis, the government was forced to pay more taxes to the people with the introduction of a “super tax” that also followed the slabs” concept.

The Act of 1918

“This action was a consolidation of all tax-related laws into one. For the first time, the phrase “all revenue arises when it comes to or comes from or is received in British India.” Various definitions are given in Section 2 of the Act, where the definition of “company” and “years ago” was introduced for the first time”

There were six categories of taxable income namely,

  1. Income from income.
  2. security interest.
  3. income from property assets.
  4. business income.
  5. income from technical income.
  6. income from other sources.

The Act of 1922

“The 1922 act was issued following the recommendation of the All-India Income Tax Committee established in 1921. Following the introduction of the Act, revenue management was shifted from the functions of the provincial government to the central government. All forms of income are covered by this action; however, it frees up ordinary income and fixed income into cash, except for unpaid accommodation. Last Year was established as the basis for the calculation of taxes” The businesses to be tested were, “individuals”, “HUF”, “Company”, “firm” and “other people's organization”.

“There were still many shortcomings that took about 20 amendments that took place between 1922 and 1939 to eliminate the issue of tax evasion and evasion. The main objective was to increase government revenue to meet the ever-increasing levels of taxes. In 1939, 20% of government revenue was taxed which was the second tax collected by the central government. However, rising tax rates are also associated with deductions, grants and benefits”

The Act of 1939

This action “was introduced as an amendment to the previous action following the recommendations made by the Aiyer Committee Report whose purpose was to ensure the effective implementation of the tax administration of the previous law” The move also included “foreign income” received by British “residents” in India. There were three categories of tests performed, “resident” and “non-resident” known as “resident but not normally”.

“In this act, the slabs were removed and instead, the action was introduced as a tax plan. In this case, for example, 5% was an average of Rs. 10,000 and in the event of an increase in revenue by Rs. 50, a total of Rs. 10,050 were to be taxed at the next 10%. This step-by-step tax was different from the slabs as the latter, the tax hike was slow and accompanied by an increase in revenue”

The Period from 1939 to 1961

The 1939 “act failed to work and passed nine amendments” In 1944, “a high-tax system was introduced. A tax commission was set up under the leadership of Dr John Mathai. The purpose of this commission was to ensure the distribution of tax burdens and the inequality of income and wealth, even if the tax system was appropriate and in line with national development goals” Mr. “Nicholas Kaldo came to India in January 1956 at the request of the Indian Statistical Institute to evaluate the effectiveness of the Indian Taxation program, the report of which was finalized and implemented in accordance with various laws, namely, the Wealth Tax Act, 1957, the Expenditure Tax Act, 1957 and the Gift Tax Act” 1958.

“The Legal Commission was approached by the Indian government in 1956 to change the income tax in India following lines of concept and simplicity without undermining the basic structure. A specific Tax Administration Inquiry Committee was appointed by Shri Mahavir Tyagi. The purpose was to advise on steps that can be taken to prevent tax evasion. The reports of both of the above-mentioned committees have led to the introduction of the Income Tax Act, 1961”

The Income Tax Act, 1961: The Reform and its Performance

In place “of the 1922 Act, the Income Tax Act of 1961 came into effect on 1 April 1962 and is still in force. This current action has more than 298 sections and 4 schedules applicable throughout India except the country of Jammu and Kashmir” “This action increases the number of untested stages to seven from six in the old action. The new section included in the law is everyone's law of artificial law which is a water category. A temporary test was taken and instead, a self-examination was performed. Strict rules were imposed on fines for tax evasion and interest”

“The government's aim was to lower taxes on low-income party members and in that case, there were limits to exemptions”

“Governments have always tried to keep the tax bracket on low-income low-income people as opposed to others. In all likelihood, a full tax deduction is granted to all those below the prescribed limit. And since 1947, the limit of liberation has been steadily rising. In 1961, when the Income Tax Act was introduced the exemption limit was 3000, while 6000 for HUF. The practice also recognized the idea that 'family subsidy' was a tax advantage offered to married people with at least one child” Over time “the tax system has completely changed. Given the high level of independence since the time of Freedom, tax laws have been a tool of government promoting social and economic goals in line with current laws. Various tax benefits were made to destroy the tax base. And another such failure was the rising costs, which lasted for a long time, eventually increasing costs. India withdrew its tax incentives from existing world policies. After that, in 1990 most of the incentives offered to business houses were taken away, leaving not even corporate taxes. However, with the advent of liberal policy, such amazing incentives found their way into the picture. Following the enactment of the FRBM Act, a request was made for the distribution of various tax incentives provided. And finally, 2016 was the year when the Government made corporate tax, or less. In the concluding letter, it can be seen that the work done to increase the tax structure of visual entities seems to have been completed. However, the full impact can only be seen until 2027”

Conclusion

The “timeline mentioned above shows that the nation has gone a long way in making progress in tax reform, especially in tax administration which has significantly improved tax revenue in the GDP ratio. However, this is not the end and it is only the beginning when there is still a long way to go in tax reform. The tax reform and management system are ongoing process that is an important tool in improving revenue generation and reducing distortion and escape and better equity” As previously noted, “even after years of tax reform and renewal, there are still many aspects of the current tax system that are less efficient and worrying. Improving the productivity of the tax system remains a major challenge in the face of tax reform” Even after such improvements in GDP the tax rate will still reach higher levels of performance. Although income tax coverage has shown significant progress, much remains to be done to reach the disadvantaged groups. Over the past decade, a major milestone will have to be the introduction of technology in tax administration where there has been a shift from manual management testing to e-based self-assessment and reporting. Each process work without scrutiny is based on technology. Although recently, the department has also come up with e-scrutiny which is used for testing, but if it is used, it will be a major step in ending the communication between officials and taxpayers.


Navigation: Home»Taxation Law