Exploring the Evolution and Impact of Indian Tax Structure: A Comprehensive Analysis

The Evolution of Indian Tax Structure: From Ancient Principles to Modern Reforms

India’s tax structure has a rich history that dates back to ancient texts like the ‘Manu Smriti’ and ‘Arthashastra,’ which provided guidelines on taxation principles. Since gaining independence, India has continuously transformed its tax system through various committees and legislative acts. The modern taxation system was established during British rule, with significant revisions in 1961 with the Income Tax Act.

The Indian government’s authority to collect taxes is legitimized by the Constitution of India, which distributes tax-levying powers between the Union and State governments. The tax system is governed by the Finance Bill, passed annually by the Parliament or State Legislature. The Central Board of Revenue Act of 1924 established the Board responsible for income tax administration.

Expert committees like the Indian Taxation Enquiry Committee and Taxation Enquiry Commission have aimed at simplifying tax laws, widening the tax base, and enhancing the income tax department’s efficiency. Despite significant progress, challenges like tax evasion and administrative inefficiencies persist, requiring ongoing reforms.

India’s current tax system is a three-tier federal framework, with the Central Government responsible for income taxes, customs duties, and GST. State Governments levy SGST, stamp duty, and other state taxes, while local governments impose property taxes and utilities charges.

The revenue collected through taxes is utilized for public works projects, infrastructure development, healthcare, education, and social welfare programs. The Income Tax Act defines income comprehensively, and the Central Board of Direct Taxes administers direct taxes, ensuring compliance and transparency.

Taxation laws in India have evolved to address economic disparities, promote social justice, and support economic growth. However, challenges like tax evasion and compliance burdens remain, necessitating continuous reforms and improvements in tax governance and administration.

In conclusion, India’s taxation laws play a crucial role in revenue mobilization, economic development, and social welfare. By addressing challenges, enhancing tax compliance, and promoting transparency, India can harness the full potential of its tax system to foster inclusive growth and sustainable development.