Tax Law
Historical Background
History of Taxation
• Records of taxation date back in
antiquity to the times of the
earliest civilizations.
• Evidence of taxation can be found
on an inscription on an ancient
Sumerian tablet from the city of
Lagash (located in what is now
Iraq) which states-
Ancient India
• The system of direct taxation has come into
force in one form or another since ancient
times.
• In both the Manu Smriti and the Arthasastra,
references have been made to a variety of tax
measures.
Ancient India
• Manu Smriti and the Arthasastra has clearly
shown the existence of a judicious system of
taxation even in ancient times.
• Taxes were levied on various classes of
individuals such as actors, dancers, singers,
and every stratum.
• Taxes in ancient times were payable in the
form of gold coins, livestock, grain, raw
materials, and also personal service.
Taxation in Ancient India
• “ As the Leech, the calf and
the bee take their food little
by little, even so must the
king draw from his realm
moderate annual taxes..”
Manu Smriti
• Manusmrti is the oldest and predominant
source of income tax provisions.
• Manusmrti emphasizes the strategic
imposition and regulation of corporate income
tax.
• Taxation must not be a painful experience for
subjects.
• Taxation must be right enough to meet a
reasonable revenue target and also feel right
to the masses.
Taxation in Ancient India
• “ it was only for the
good of his subjects
that he collected taxes
from them just as the
sun draws moisture
from the earth to give it
back a thousand time”
Arthashastra
• Arthashastra is one of the more prominent
sources of tax laws and regulations in India.
•
• The Arthashastra could be considered the
primary Indian text mentioning public finance,
financial administration, and financial laws in a
structured manner.
Taxation in Ancient India
‘ From the
treasury , comes
the power of the
Government and
the Earth, whose
ornament is the
treasury, is
acquired by means
of the treasury and
army’
Arthashastra
• Farmers would pay 1/6 of production flat rate
for land taxation
• The rich would pay higher taxes and the less
privileged would be levied lower taxes
• Book rule with limited flexibility to tax
collectors
Taxation in Ancient India
• “ Most of the taxes of Ancient India were highly
productive. The admixture of direct taxes with
indirect taxes secured elasticity in the tax system,
although more emphasis was laid on direct tax.
• The tax structure was a broad based one and covered
most people within its fold. The taxes were varied
and large variety of taxes reflected the life of a large
and composite population”
• [Sarkar K B, Public Finance in Ancient India ( 1978)]
Income Tax in Recorded History
• The first records of organized records come
from Egypt around 3000 B.C. It is mentioned in
many historical sources, including the Bible.
• Britain first levied income tax on movable
property in 1798 to cover the costs of the war
against Napoleon.
• It was first imposed in India in 1860 by the
then British Indian government.
East India Company
Indian First war of Independence
Income taxation by Legislation in India
• Income Tax of Act of
1860
• Lasted for 5 years
• Between 1880-1886
there were 23 tax
enactments
JAMES WILSON
Salient features of the Income Tax
Act, of 1860
• Exemption of income from agricultural
production from taxation
• Life insurance premiums were exempt from
tax
• Hindu undivided family was approached as a
separate taxable unit
Income Tax Act 1918
• Some major changes were made by the
Income Tax Act of 1918 in the income tax
system.
• For the very first time, income and deductions
of a contingent or non-recurring nature were
also included in the calculation of taxable
income.
Salient features of the Income Tax
Act, 1918
• Non-recurring income in the course of
business or professional activity was also
included in the calculation of net profit;
• Non-recurring deductions have been included
in the calculation of taxable income.
Income Tax Act 1922
• Most notable milestone in the history of the
Income Tax system in India.
• Primarily organized income tax structure in
India.
• 1922 Act provided much-needed flexibility in
India’s income tax system.
• In addition, it established a proper system of
tax administration in India, which continued
to function for the next 40 years.
Income Tax Act, of 1922 features
• The tax rate was determined according to the
budget requirements of the given period;
• Changes in the law were no longer necessary
for changes in the tax rate
YEAR Legislation
1886 License tax converted into Income-tax Act, 1886
1916 Graduated rates of taxation on income above
Rs.2,000 introduced
1917 Super Tax introduced
1918 Income-Tax Act of 1918 passed
1919 Imposed duty on excess profits
1920 1919 Act abolished
1922 Indian Income Tax Act, 1922 was passed
1939 Substantial amendments to 1922 Act
1961 New income Tax Act, 1961 came into force on
April1, 1962
This Act, with numerous amendments made from
time to time by various Finance Acts, is in force at
present
Period 1961 - 1994
• Changes in substantive and procedural
content
• Practically every Finance Act brought some
changes ; several amending Acts
Tax Reform Commitees
• Bhootthalingam Report – 2 parts
• Report of working Group of administrative
reforms
• Report of Wanchoo committee
• Report of Direct Tax law Committee
• Report of Enquiry committee
• Justice Chellaiah Committee report ( Tax
Reforms Committee)
Indirect Taxes
• Indirect taxes were first introduced in India in
1944 to protect British-made goods in the
domestic market.
• After independence, the Indian Government
introduced some new indirect taxes.
Tax Payers Charter
• Every taxpayer is entitled to expect the
Income-Tax Department –
• To be Fair
• - in deciding tax matters, by providing a right
to be heard and by being objective and
impartial in collecting taxes that are
legitimately due;
Tax Payers Charter
• To provide quality service
• - settling tax affairs promptly
• - by keeping personal and private information
furnished to the Department confidential
• - by being courteous to the taxpayers
Tax Payers Charter
• To assist him
• - in understanding the rights and duties under
the tax laws;
• - in availing of the benefits and concessions
due to him
• - in getting information and assistance at the
enquiry counters
1. In Arthashasthra Tax on Farmers
provided
a) Farmers would pay 1/4 of production flat rate
for land taxation
b) Farmers would pay 1/6 of production flat rate
for land taxation
c) Rich farmers would pay more tax
d) No farmer pay taxes
2. GST was introduced on
a) 1 June 2017
b) 1 June 2018
c) 1 July 2017
d) 1 April 2017
3. Taxes are collected …just as the sun draws moisture
from the earth to give it back a thousand time, said
a) Manu
b) Chanukya
c) Kalidasa
d) Yajnavalka
4. Substantial amendments were
made to 1922 Act in
a) 1938
b) 1937
c) 1939
d) 1940
5. Income Tax Act, 1961 came into
force in
a) 1 April 1961
b) 1 July 1961
c) 1 April 1962
d) 1 May 1962
6. Following are subsumed in GST
a) CENVAT
b) Service Tax
c) Entry Tax
d) All of the above
7. Service tax imposed under
a) Art.268
b) Art.268A
c) Art.267B
d) Art.269
8. Customs Act was made in
a) 1961
b) 1962
c) 1963
d) 1964
9. Which of the following is not
Customs duty
a) Basic Customs Duty (BCD)
b) Countervailing Duty (CVD)
c) Special Additional Duty (SAD)
d) None of these
10. Following are NOT subsumed in
GST
a) Professional Tax
b) Purchase Tax
c) Luxury Tax
d) Taxes on Lottery
