2020-2021

LAW OF
TAXATION
 HISTORY OF TAXATION

SUBMITTED BY- SUBMITTED TO-

HARSH BHAI PATEL DR. RAMA GUPTA
SECTION-A ASSISTANT PROFESSOR
ROLL NO.- 180010450033 FACULTY OF LAW
B.A. LL.B. HONS. UNIVERSITY OF LUCKNOW
FACULTY OF LAW
UNIVERSITY OF LUCKNOW
 TABLE OF CONTENTS

Contents

INTRODUCTION.....................................................................................................................2

HISTORY OF TAXATION IN INDIA.....................................................................................3

CONCLUSION.........................................................................................................................6

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INTRODUCTION
India has abolished multiple taxes with passage of time and imposed new ones. Few of such
taxes include inheritance tax,1 interest tax, gift tax, wealth tax, etc. Wealth Tax Act, 1957 was
repealed in the year 2015.2

Direct Taxes in India were governed by two major legislations, Income Tax Act,
1961 and Wealth Tax Act, 1957. A new legislation, Direct Taxes Code (DTC), was proposed
to replace the two acts.3 However, the Wealth Tax Act was repealed in 2015 and the idea of
DTC was dropped.

The word ‘tax’ is derived from the Latin word taxare or taxo. It means ‘to assess the worth of
something’. Taxes are imposed by government for the use and service of the State. They are
levied and collected by the State for the purchase or sale of merchandise or a service. Taxes
provide revenue to the state, and is therefore one of the most significant aspects of any
system of administration by any form of government.

The strength of an economy depends upon how good the tax system is. A just tax system can
propel the economic growth of a country and lead to its prosperity. This in turns makes its
citizens happy and more productive. An efficient taxation policy leads to growth in GDP; it is
considered sound if it performs allocative, distributional and stabilization function in the
economy. 

There are two types of taxes – direct and indirect. Direct taxes are those that an entity remits
to the government directly, and include income tax, property tax, etc. indirect taxes are those
that an entity remits through third parties. Service tax is an example of indirect tax imposed
by the government of India.

Any tax imposed by the government (Central, state or local) has the following
important characteristics:

1
"Inheritance tax on HNIs likely to be reintroduced", The Economic Times, 5 October 2017

2
“View: Government should reinstate wealth tax in Budget 2017”, The Economic Times, 6 December 2016

3
"Direct Taxes Code Bill: Government keen on early enactment". The Times Of India. 16 March 2012.

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  It is mandatory: since any form of tax is imposed by the government for the benefit
of the country, it is required by law to pay taxes
 It is a contribution: tax is a contribution made by citizens for the betterment of their
country. The government of India provides basic healthcare, infrastructure, defence,
etc. with the money collected from taxes
 It is for public benefit:  the purpose of collecting taxes is for the benefit and
upliftment of the society in general. Taxes are not supposed to favour specific
individuals. Disaster maintenance and rescue is an important aspect of the money
collected in the form of taxes
 It is paid out of income earned or wealth: you pay tax only when you generate
income. If an individual does not generate a minimum threshold income (defined and
modified from time to time by the government), they need not pay some taxes like
income tax.
 It boosts economy: this is one of the most important aspects of collecting taxes.
Since the government provides for infrastructure in the form of roads, trains, power
stations, damns, etc., it utilizes the tax revenue for economic growth of the nation

HISTORY OF TAXATION IN INDIA

The word ‘tax’ springs from the Latin word taxare or taxo. It suggests that ‘to assess the price
of something’. Taxes area unit obligatory by government for the employment and repair of
the State. they're levied and picked up by the State for the acquisition or sale of merchandise
or a service. Taxes give revenue to the state, and is thus one in all the foremost important
aspects of any system of administration by any type of government.

The strength of associate economy depends upon however smart the legal system is. A just
legal system will propel the economic process of a country and cause its prosperity. This in
turns makes its citizens happy and additional productive. An efficient economical taxation
policy ends up in growth in GDP; it's thought-about sound if it performs allocative, spacing
and stabilization perform within the economy.

There are 2 forms of taxes – direct and indirect. Direct taxes are those that an associate entity
remits to the govt. directly, and embrace revenue enhancement, land tax, etc. indirect taxes
are those that an associate entity remits through third parties. Service tax is associate example
of revenue enhancement obligatory by the govt. of Republic of India.

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Any tax obligatory by the govt. (Central, state or local) has the subsequent vital
characteristics:

• It is mandatory: since any type of tax is obligatory by the govt. for the advantage of
the country, it's needed by law to pay taxes

• It could be a contribution: tax could be a contribution created by citizens for the

betterment of their country. The government of Republic of India provides basic tending,
infrastructure, defence, etc. with the cash collected from taxes

• It is for public profit: the aim of assembling taxes is for the benefit and upliftment of
the society normally. Taxes don't seem to be alleged to favour specific people. Disaster
maintenance and rescue is a very important side of the cash collected within the type of taxes

• It is paid out of financial gain attained or wealth: you pay tax only when you generate
financial gain. If a private doesn't generate a minimum threshold financial gain (defined and
changed from time to time by the government), they need not pay some taxes like income tax.

• It boosts economy: this can be one in all the foremost vital aspects of assembling
taxes. Since the govt. provides for infrastructure within the type of roads, trains, power
stations, damns, etc., it utilizes the taxation for economic process of the state

Income is the cash that a private or business receives in exchange for providing a decent or
services. a proper legal system was existing in Republic of India since the time of Maurya
dynasty. The upper category of citizens contributed 1/6th of their financial gain as tax. It's
same that even before the Mauryas, tax was mentioned in Manu Smriti, one in all the
foremost ancient scriptures of Republic of India. The next Mughal invaders brought with
them their own taxation system. The infamous Jezia was a tax obligatory on the non-Islamic
folks of the land. In India, it was abolished by Akbar.

The income tax as we all know these days was 1st introduced in Republic of India in 1860 by
the British. It was introduced to atone for the losses sustained by the govt. due to the rebellion
of 1857. Income Tax is outlined because the annual charge levied on each attained financial
gain (wages, salaries or commission) and honorary financial gain like dividends, interest or
rent. Additionally, to funding a government’s operations, progressive income taxation is

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meant to distribute wealth creation more equally during a population and to function buffer
just in case of fluctuations within the economic cycle. There are 2 basic forms of revenue
enhancement: personal income tax and corporation income tax.

The income tax Act was passed in Republic of India in 1886, and there are constant revisions
and refinements within the Act since then. After the first world war, a replacement income
tax Act was passed, in 1918, once more to counter the residual effects of economic
devastation caused by the war. This income tax Act was in situ until 1922, once it had been
replaced by another Act. After forty years, and fifteen years when Republic of India gained
freedom from the British, the income tax Act was changed once more. This income tax Act
has been adopted in 1961, and acquired into force with impact from Gregorian calendar
month one, 1962. It encompasses the full of Republic of India, as well as geographic area,
Jammu and Kashmir. The Central Board of Revenue divided and created a separate Board for
Direct Taxes referred to as because the Central Board of Direct Taxes underneath the aegis of
Central Board of Revenue Act, 1963.

Currently, there are 5 broad heads underneath that income is taxed by the govt. of India:

• Income from salary

• Income from business or profession

• Income from capital gains

• Income from property

• Income from different sources

Each sequent government amends the Act with associate aim to finance government
operations, and to undertake and distribute wealth more equally. An obvious feature of the
income tax Act of Republic of India is that agricultural financial gain in India isn't non-
exempt. Income Tax in Republic of India (and all different countries) is assessed annually for
the previous financial year.

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CONCLUSION
India presently contains a three-tier setup for taxation. The central government and therefore
the authorities both can impose tax. The authorities successively will delegate taxation to the
native governing bodies just like the municipal companies and gram panchayats. It's
aforementioned that that the Indian legal system is one in all the foremost complicated within
the world, as well as the likes of tax, wealth tax, capital levy, gift tax, sales tax, VAT, custom
duty, excise duty (now replaced by GST), company tax, tax and a excess or different taxes?
so, it's one in all the explanations why there's a high demand in India for tax consultants, GST
consultants, auditors, and different professionals.

As a nation evolves, it wants amendment. India isn't any exception. No doubt as the nation
progresses, the tax structure of India can endure several refinements. for instance, the Goods
and Services Tax (GST), that has replaced the Central and State indirect taxes like VAT,
excise duty and service tax, was enforced in India on July 1, 2017. GST has been already
introduced in additional than a hundred and sixty countries, ranging from France wherever it
absolutely was introduced manner back in 1954. So, it is safely aforementioned that GST
may be a tired and tested taxation solution; India needn't worry unnecessarily regarding its
effectiveness.

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