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August 16, 2022

Knowing the history of India’s income-tax rates is fascinating

by Admin in Income Tax

Knowing the history of India’s income-tax rates is fascinating

At one point Income Tax rate was as high as 99.75% with 11 tax slabs !

Imagine you earning 100 Rs and paying 99.75 Rs to Govt.

The first one is from 1949-50 – India’s first finance minister, John Mathai, reduced Anna income tax up to ₹10,000. In the first slab, the reduction was made of an Anna with nine pies and two Annas with “nine pies” on the second plate.

In 1974-75 – IT Slab Rate was reduce by Y. B. Chavan The maximum Income tax rate was lowered to 75% from 97.75% Taxes were reduced at all slabs of income tax. There was no income tax for individuals who earned up to ₹6,000.

In 1985-86 – Vishwanath Pratap Singh restructured the tax structure by reducing the number of income tax slabs from eight to four. The highest marginal rate of income tax on personal incomes decreased from 61.875 per cent to 50 per cent.

In 1992-93 – Manmohan Singh reduced the number of slabs to three. Entry rate was 20% applicable for incomes Rs 30, 000 to Rs 50,000, a middle slab for incomes between Rs 50,000 & Rs1 lakh with a tax of 30%, and a maximum rate of 40% for those earning above Rs1 lakh.

In 1997-98, P. Chidambaram presented the ‘Dream Budget’. This budget brought down the highest tax bracket from 40% to 30% and exemption bracket for the lowest slab was also increased to ₹40,000 per annum from ₹35,000 earlier.

In 2012-13, Pranab Mukherjee not only increased the exclusion limit of individual taxpayers from ₹1.8 lakh to ₹2 lakh but also slightly modified the tax brackets.

In 2014-15  Arun Jaitley replaced the wealth tax with a surcharge of 2 per cent on the super-rich with a taxable income of above Rs 1 crore. Taxpayers, therefore, were not required to file a wealth tax return from AY 2016-17 onward.

In 2017-18 Jaitley reduced the existing rate of taxation for individual assesses with income between Rs 2.5 lakh and Rs 5 lakh to 5% from the present rate of 10%. Added to this, the existing rebate under Section 87A, the tax burden uo to Rs 3 lakh would be nil.

In 2019-20 Taxpayer’s whose income does not exceed Rs 500000 will remain tax free as enjoying benefit of rebate of Rs 12,500 u/s 87A Newly introduced surcharges those taxpayer’s whose income is between Rs 2 cr to Rs 5 cr will pay 39% as tax, more than Rs 5 cr will pay 42% as tax.

In 2020-21 FM Nirmala Sitharaman a new simplified optional personal tax regime is introduced, under which reduced income tax rate would apply to individuals who forgo some deductions and exemptions.

Expectations are high for coming #Budget2023 for further slab rate reduction and increase in deduction.

With record tax collections, it becomes easy for any FM to reduce rates and elections in 2024 will give further push !

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