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Modern History of Income Tax |
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In order to know more about the modern history of income tax we have to hark back to the 1860. In this year for the first time the Income Tax Act was introduced and which remained in force for a period of 5 years. This Act became obsolete in 1865. Thereafter the Income Tax Act-II was reintroduced 1886. This Act of 1886 started a new era in the modern history of India and was an the improved version of the previous act. It introduced the definition of agricultural income and the exemption it granted in respect of agricultural income has continued to be a feature of all subsequent legislations.
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The year 1918 has a great significance in the modern history of income tax because it witnessed the introduction of Act VII of 1918. Subsequently, this Act rejected the entire tax laws. This Act came up as a solution to certain serious disparities and inequalities in the assessment of individual tax payers under the 1886 Act. The Act introduced the scheme of aggregating income from all sources for the purpose of determining the rate of tax.
The Indian Income Tax Act, 1922 which came into force as a result of the recommendations of the All India Income Tax Committee, set a milestone to the evolution of Direct Tax Laws in India. Importance of this Act is in the fact that the administration of the Income Tax hitherto carried on by the Provincial Governments came to be vested in the Central Government. The Act of 1922, similar to the Act of 1918, applied to all incomes whether it is accruing or arising or received in British India, or deemed to be accrued, arisen or received. This Act is recognized as one of the most important changes from the Act of 1918. It established too the charge in the year of assessment on the income of the previous year instead of merely adopting the previous year's income as a measure of income of the year of assessment.
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