IN INDIA & BRITISH HERITAGE
Century saw the establishment of British Rule in India. The British
Government felt acute financial difficulties consequent on the
Freedom of 1857 and to fill up the treasury, the first Income-tax
Act was introduced in February, 1860. Thereafter, there were many
developments in the field of taxation in British India and these
were generally modelled on the pattern of taxation system existing
in Britain, at the relevant time. It would, therefore, be relevant
here to briefly trace the history of taxation in Great Britain.
The history of direct taxation in England goes back to many centuries
and the first duties were in the nature of Stamp Duties which
were introduced in England in the reign of William and Mary. It
was in 1694 that the Stamp Duties were introduced in England and
a Board of Commissioners of Stamps was set up to administer the
duties. These stamp duties have survived, even till today.
was first levied in England by Pitt as a War-time measure in 1798 with a tax of
2s in the pound on total income. It was a very unpopular measure mainly on
account of the fact that every taxpayer was obliged to make a return of his
total income. This tax was introduced as a war-time measure and was repealed
when the war ended in 1802. Thereafter, it was again introduced in 1803 and
incorporated several features that have remained intact, even till now. In 1842,
Peel re-introduced the tax as a temporary measure with the hope that it would be
abolished in a few years’ time. However, this could not be abolished and since
1842, Income-tax has been continuously in force in Great Britain. On the eve of
outbreak of the First World War in 1914, the standard rate of Income tax was 1s
2d in the pound. But it was raised to 6s 0d, in the pound, as the war continued
and the number of taxpayers rose from about 1 million to over 4 million.
addition to the Income-tax, Lloyd George introduced a new tax on individuals in
1909 known as super-tax. The rate was 6d in the pound on incomes over 5,000
pound a year. In 1927, sur-tax was substituted for super-tax and thereafter, the
rates were also increased progressively. During the war years 1939 to 1945,
profits from business were subjected to an Excess Profit-tax.
income-tax and sur-tax and E.P.T., England also had Estate Duty in one form or
the other, on its statute, for a long time. Lord North introduced a legacy duty
in 1780 to tax receipts from legacies. Since this was found ineffective, Pitt
introduced a more effective legacy duty in 1876. However, Estate Duty itself was
introduced by Sir William Harcourt in 1894. Since then, the Estate Duty has
survived in Britain. The rates of Estate Duty have been made progressive with
the passing of years.
the administration of taxes, a Board of Taxes was appointed in 1784 to replace
earlier bodies which were managing different taxes. In 1833, the Board of Stamps
and Board of Taxes were united into a Board of stamps and Taxes. In 1849, the
Board of Stamps and Taxes and the Board of Excise were amalgamated to be known
as the Board of Inland Revenue. Thereafter in 1909, the administration of Excise
and Customs was transferred to the Board of Customs and Excise. The Board of
Inland Revenue is working under the Inland Revenue Regulation Act, 1890.
The above brief
history of taxation in Great Britain would show that when the
Britishers took over control and administration of British India
after the freedom of 1857, they had before them a long experience
of various tax laws being administered in Great Britain. It was
but obvious that in introducing the Income tax to this country,
the British Officers would depend upon and draw largely from the
parent country’s experience in tax laws and administration thereof.
As stated above,
the First Income-tax Act was introduced in India in 1860 by James
Wilson who became India’s First Finance Member. This became necessary
since supression of freedom of 1857 entailed very heavy expenditure
and made a large addition to the public debt. In 1856-57, military
expenditure which was only Rs. 17 crores increased to Rs. 32 crores
in 1858-59. This increase was on account of recruitment of more
European soldiers and Officers in the army.
The Finance Member James Wilson while introducing
the Income-tax Act in 1860 quoted from the authority of Manu for
levying income tax in this country. The Act received the assent
of the Governor General on 24th July, 1860. It came
into effect immediately and was modelled on the English Statute.