In India, the system of direct taxation has been in force in one form or another even from ancient times. Now we are going to discuss the evolution of Income Tax:
1860: In 1860, the tax was introduced for the first time by Sir James Wilson. India’s first ‘Union Budget’ introduced by the Pre-Independence finance minister James Wilson on 7 April, 1860. Income was divided into four schedules taxed separately:
- Income from landed property
- Income from professions and trades
- Income from securities
- Income from salaries and pensions.
1886: The separate income tax act was passed. The act 1886 remained in force up to, with various modifications. Under the Indian Income Tax act of 1886, income was divided into four schedules taxed separately:
- Salaries, pension & gratuities
- Net profits of companies
- Interests on the securities of the Government of India
1918: A new income tax act was passed. The Indian Income Tax Act of 1918 revoked the Indian Income tax act of 1886 and introduced several important changes.
1922: The Income Tax Act of 1922 had become very complicated on account of innumerable amendments. The Government of India, therefore, referred it to the law commission in 1956 with a view to simplify and prevent the evasion of tax.
1961: In consultation with the ministry of law finally the Income Tax Act, 1961 was passed. The Income Tax Act 1961 has been brought into force w.e.f. 1 April, 1962.
Since 1962 several amendments of far-reaching nature have been made in the Income Tax Act by the union budget every year which also contains Finance Bill.
At present, there are five heads of income:
- Income from Salary
- Income from House Property
- Income from Profits and Gains of Business or Profession
- Income from Capital Gains
- Income from other sources