TFP Bureau, Raipur, 23 July 2024: In recognition of Income Tax Day on 24th July, the Ministry of Finance reflects on India’s progressive tax administration journey, dating back to its introduction by Sir James Wilson in 1860. This milestone day highlights the continuous evolution and modernization efforts in India’s tax system.
Understanding Income Tax
Income tax is a government levy on the income earned by individuals and businesses during a financial year, encompassing various sources under Section 2(24) of the Income Tax Act. The primary categories include:
Income from Salary: Payments from an employer to an employee, including basic pay, allowances, and retirement benefits.
Income from House Property: Rental income from residential or commercial properties.
Income from Business or Profession: Profits from business or professional activities, post-expenses.
Income from Capital Gains: Profits from selling capital assets, such as property or jewellery.
Income from Other Sources: Includes savings interest, family pensions, gifts, lottery winnings, and investment returns.
Historical Context
Income Tax Day commemorates the structured implementation of income tax in India, significantly shaped by the comprehensive Income-tax Act of 1922. This Act laid the foundation for systematic tax administration, further reinforced by the Central Board of Revenue Act of 1924, establishing the board as a statutory body responsible for administering the Act.
Professional development within the department saw significant milestones, such as the recruitment of Group A officers in 1946 and the establishment of the National Academy of Direct Taxes in Nagpur in 1957. Technological advancements also played a crucial role, with the introduction of computerization in 1981 and the establishment of the Centralized Processing Centre (CPC) in Bengaluru in 2009 for efficient handling of tax returns.
Importance of Income Tax
Income tax is pivotal for nation-building, funding essential services like healthcare, education, and infrastructure. It supports economic development, wealth redistribution, and fosters a social contract between the state and its citizens. Effective tax systems enhance state capacity, accountability, and public service quality, ultimately promoting societal welfare and equity.
Current Landscape
India’s personal income tax (PIT) landscape has shown substantial growth, with gross PIT collections rising from ₹5.75 lakh crore in 2020-21 to ₹12.01 lakh crore in 2023-24. This reflects improved tax compliance and effective reforms, despite economic challenges.
Budget 2024-25: Key Changes
The 2024-25 Budget introduces significant changes to benefit salaried employees and pensioners:
Increased Standard Deduction: From ₹50,000 to ₹75,000 for salaried employees under the new tax regime.
Enhanced Pension Deductions: From ₹15,000 to ₹25,000 for family pensioners.
Extended Assessment Period: Reopen assessments up to five years if escaped income exceeds ₹50 lakh.
Other Notable Initiatives
The government has undertaken several steps to boost tax collection and expand the tax base:
Simplified Personal Income Tax: Offering lower slab rates for taxpayers not availing specified exemptions.
New Form 26AS: Providing comprehensive information on tax deductions, collections, and financial transactions.
Pre-filled ITRs: Making tax compliance easier by pre-filling tax returns with salary, interest, and dividend information.
Updated Returns: Allowing taxpayers to update returns within two years to rectify omissions.
E-Verification Scheme: Ensuring accurate income determination and reducing tax evasion.
Dispute Resolution Committee (DRC): Facilitating dispute resolution for small taxpayers.
Expanded TDS/TCS Scope: Including large cash withdrawals, foreign remittance, and high-value transactions.
Income Tax Returns Filing
The number of individuals filing income tax returns has steadily increased, from 6.48 crore in 2019-20 to 7.40 crore in 2022-23, indicating an expanding tax base and improved compliance.
Conclusion
As India celebrates Income Tax Day 2024, it acknowledges the substantial progress in its tax administration from its inception in 1860. The advancements, particularly those introduced in the 2024-25 Budget, reflect the government’s commitment to a fair and efficient tax system. By enhancing deductions, revising tax slabs, and implementing digital innovations, the government continues to strengthen its taxation approach. Income Tax Day is a celebration of our fiscal heritage and a recognition of taxation’s vital role in supporting public services and national development, paving the way for a prosperous and sustainable future for all.
