New Delhi | Manish Mishra: If you are employed and your income is more than Rs 2.50 lakh, you have to pay Income Tax to the government. Do you know that Income Tax is related to the Revolt of 1857 against British rule? You will be surprised to know that the Britishers started charging taxes to compensate for the loss caused by the revolt by the Indian sepoys deployed in the British Army.

Sir James Wilson introduced the tax in 1860 for this purpose. The new Income Tax Act was passed in 1918. Later, a new Income Tax Act was brought in 1922. This Act remained in force till 1961-62. However, by then, many amendments were made to it.

-Income Tax Act 1860

The British rulers suffered huge losses due to the rebellion by the sepoys in 1857. To compensate this, the British government passed the Income Tax Act in 1860. However, it was abolished after five years in 1865.

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Some salient features of the Income Tax Act 1860:

-Income from agriculture was tax-free

-Life insurance premiums were also tax-free

-Hindu Undivided Families (HUF) were treated as separate entities in terms of tax

Salient Features of Income Tax Act 1918:

In the Income Tax Act 1918, major changes were made to the taxation system. For the first time, receipts and deductions were included in the calculation of taxable income.

-Income Tax Act 1922

The Income Tax Act 1922 was considered a milestone in the income tax system of India. This Act became representative of the organized income tax structure in India. The Income Tax Act 1922 brought the flexibility that India needed in the tax system. This act remained in force in the country for the next 40 years. The special feature of the Income Tax Act 1922 was that the rates of taxes were decided according to the budgetary requirements of the then period. Also, an amendment to Income Tax Act is no longer necessary for a change in the tax rate.

-Post-independence Tax system

The Income Tax Act 1922 was the most important till 1962, but several amendments were made to it till 1961, when the government of India brought the Income Tax Act 1961. After it was implemented, there was a significant change in the history of income tax in the country.
A system for revenue audit was introduced in the country for the computation of tax. The responsibilities of Income Tax Officers were also prescribed under this Act. At present, only the Income Tax Act 1961 is in force. A year later, the government brought Income Tax Rules in 1962. The Central Board of Revenue was bifurcated and the Central Board of Direct Taxes (CBDT) was also established under the Central Board of Revenue Act, of 1963.

Some special features of the Income Tax Act 1961:

Income tax levies on income in five ways which include:

-Income from salary

-Income from business or profession

-Income in the form of capital gains

-Income from house property

-Income from other sources

Why does the government collect taxes?

When the government collects tax from the people, it goes directly to its treasury. The government in power determines the usage of taxes and how to organise the budget. The taxpaying system is not optional in India. If you fall under the prescribed tax slab, you will have to pay tax.

To provide basic facilities to every citizen of the country, the government directly or indirectly collects the amount in the form of tax and uses it for the welfare of society.

Mainly, money collected through taxes is used for building hospitals, roads, educational institutions, and free houses/electricity/rations for the poor. Also, taxes are used to produce electricity, water supply, maintain law and order (police administration), fire service, Judicial system, disaster management and other public welfare developmental projects.

(Note: The above story has been originally written by Manish Mishra, Deputy Editor, Dainik Jagran. It was translated to English by Talibuddin Khan, Senior Sub-editor, Jagran English.)

Posted By: Aalok Sensharma