Indian Tax Structure after Independence:
The period after Independence was quite challenging for the tax planners. An enormous black economy set in both due to Second World War and increases in economic activity after independence. Savings and investment were encouraged through the different taxation laws by the way of incentives. There was a requirement for generating huge amount of revenues to fund the economic growth of the country. The tax department took great care to plan the tax structure not only with the aspect to widen the income tax base, but also to look for alternate taxes and to eliminate tax avoidance .The department was harshly tested due to the high volumes of work.
- Some of the prominent taxes that came into existence were:
- Business Profits Tax (1947)
- Capital Gains (1946-48 to 1956)
- Estate Duty (1953)
- Wealth Tax (1957)
- Expenditure Tax (1957)
- Gift Tax (1958)
To check the growth of black money, high denomination notes were demonetized in 1946. In 1961, The Income tax Act was remodified, replacing the outdated law of 1922.
Income Tax Structure Post Liberalization:
The wave of tax reforms that started across the world in the second half of 1980’s found its way into India. As part of its policy of liberalization, India introduced tax reforms in the 1990’s.The reforms introduced in the Indian tax structure are various in comparison to other countries. In India, The tax reforms took place independent of interference from any external multilateral agency unlike some other countries. But the tax reforms took place in such a way as to ensure its obedience to the prevailing International trends.