{"id":1017,"date":"2025-02-13T04:51:47","date_gmt":"2025-02-13T04:51:47","guid":{"rendered":"https:\/\/theleagle.in\/?p=1017"},"modified":"2025-07-18T15:10:33","modified_gmt":"2025-07-18T15:10:33","slug":"skeletal-timeline-of-income-tax-reform-in-india","status":"publish","type":"post","link":"https:\/\/theleagle.in\/?p=1017","title":{"rendered":"Skeletal Timeline of Income Tax Reform in India"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div>\n<p><strong><u>1860-1886<\/u><\/strong>:&nbsp;<\/p>\n\n\n\n<p>Income tax was introduced in India for the first time in 1860 to overcome the financial difficulties due to First War of Independence of 1857. The period of 1860-1886 saw the Govt alternating between income tax and license tax as a source of revenue. Income tax became the preferred option when the first systematic form of income tax law was passed in 1886.&nbsp;<\/p>\n\n\n\n<p>1860: Income Tax Act, 1860 enacted in India<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>First income tax law of India\u00a0<\/li>\n\n\n\n<li>Income was divided into four schedules to be taxed separately\u00a0<\/li>\n\n\n\n<li>Four schedules were: income from landed property, income from professions and trades, income from securities, and income from salaries and pensions<\/li>\n<\/ul>\n\n\n\n<p>1863: Income Tax Act, 1860 \u2018expired\u2019&nbsp;<\/p>\n\n\n\n<p>1869: Income tax was reintroduced due to financial difficulties faced by the British Govt&nbsp;<\/p>\n\n\n\n<p>1873: Income Tax Act, 1869 \u2018expired\u2019&nbsp;&nbsp;<\/p>\n\n\n\n<p>1878: Income tax was replaced by&nbsp;<a href=\"http:\/\/piketty.pse.ens.fr\/files\/AlvaredoBergeronCassan2017Appendix.pdf\">license tax<\/a>&nbsp;to raise money for famine insurance<\/p>\n\n\n\n<p>1886: Income Tax Act, 1886 enacted with important changes&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Income was divided into four classes<\/li>\n\n\n\n<li>Four classes were: salaries, pensions or gratuities, net profits of companies, interest on securities of Govt of India, and income from other sources\u00a0<\/li>\n\n\n\n<li>Agricultural income was exempt from income tax and so were properties devoted to charitable and religious purposes\u00a0\u00a0<\/li>\n<\/ul>\n\n\n\n<p><strong><u>1918-1961<\/u><\/strong>:&nbsp;<\/p>\n\n\n\n<p>The foundation for modern Indian income tax law &#8211; as we know it today &#8211; was laid with enactment of 1918. Income tax reforms were initiated after the First World War and eventually led to a broad review of income tax collections leading to enactment of Income Tax Act, 1922, foundational legislation for the current Income Tax Act, 1961. The foundation for tax administration was also laid during this period.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p>1918: Income Tax Act, 1918 replaced the Income Tax Act, 1886&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Broad shape of contemporary income tax law started emerging\u00a0\u00a0<\/li>\n\n\n\n<li>Act of 1918 replaced \u2018schedular income tax\u2019 with \u2018total income tax\u2019\u00a0<\/li>\n<\/ul>\n\n\n\n<p>1922: Predecessor to the Income Tax Act, 1961 enacted&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Income Tax Act, 1922 was enacted based on recommendations of All India Committee<\/li>\n\n\n\n<li>Income tax rates were determined annually via \u2018Finance Acts\u2019 (Annual Budget) and were not encoded in the Income Tax Act itself\u00a0<\/li>\n<\/ul>\n\n\n\n<p>1939: Special Enquiry Committee comprised of experts from India and England&nbsp;<\/p>\n\n\n\n<p>1941: Income Tax Appellate Tribunals were established&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>First specialist tribunals constituted in India\u00a0<\/li>\n<\/ul>\n\n\n\n<p>1956: Union of India stresses on reform of IT Act, 1922<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It was acknowledged that IT Act, 1922 had grown in an unplanned manner\u00a0<\/li>\n\n\n\n<li>It was decided to re-examine the IT Act, 1922 to simplify it and make it more intelligible and referred the task to Law Commission of India\u00a0\u00a0<\/li>\n<\/ul>\n\n\n\n<p>1958:&nbsp;<a href=\"https:\/\/cdnbbsr.s3waas.gov.in\/s3ca0daec69b5adc880fb464895726dbdf\/uploads\/2022\/08\/2022080592.pdf\">Law Commission of India<\/a>&nbsp;submits it report&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>12<sup>th<\/sup>\u00a0Report of the LCI made extensive suggestions for rearrangement of provisions<\/li>\n\n\n\n<li>LCI stated that income tax law was in a state of \u2018hopeless confusion\u2019 due to constant tinkering with the IT Act, 1922 via short sighted amendments\u00a0<\/li>\n<\/ul>\n\n\n\n<p>1959:&nbsp;<a href=\"http:\/\/indianculture.gov.in\/reports-proceedings\/report-direct-taxes-administration-enquiry-committee-1958-59-0\">Tyagi Committee<\/a>&nbsp;submitted its report&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Committee was formally called \u2018Direct Taxes Administration Enquiry Committee\u2019\u00a0<\/li>\n\n\n\n<li>The Committee acknowledged that simplification of tax laws was not an easy task. It recommended that provisions of IT Act, 1961 should be rearranged more logically and expressed in clearer language to remove ambiguities in the law<\/li>\n<\/ul>\n\n\n\n<p>1961: Income Tax Act, 1961 was enacted&nbsp;<\/p>\n\n\n\n<p>Promise of IT Act, 1961<\/p>\n\n\n\n<p><strong><u>Promise of Income Tax Act, 1961<\/u><\/strong>:&nbsp;<\/p>\n\n\n\n<p>Morarji Desai promised the following when introducing the income tax law in 1961:&nbsp;<\/p>\n\n\n\n<p><em>Simplification has been sought to be obtained by replacing obscure and ambiguous expressions with clear ones and by re-arranging the provisions of the Act so as to make them more easy of comprehension than they are at present.&nbsp;<\/em><\/p>\n\n\n\n<p><strong><u>1961-Present<\/u><\/strong>:&nbsp;<\/p>\n\n\n\n<p>Over years, Income Tax Act, 1961 grew complex, longer, and difficult to decipher due to various reasons. The Union of India\u2019s propensity to amend the law every year, frequently with retrospective effect, emergence of novel forms of business transactions, incomes, tax evasion techniques, and divergence between the Revenue Department\u2019s understanding of income tax law provisions and judicial interpretation of such provisions contributed to the complexity. Not least was the use of extensive \u2018Provisos\u2019, \u2018Explanations\u2019 in the statute which made the law difficult to understand and administer.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p>1963:&nbsp;<a href=\"https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/1500\/2\/A1963-54.pdf\">Central Boards of Revenue Act, 1963<\/a>&nbsp;passed&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Repealed the Central Board of Revenue Act, 1924\u00a0<\/li>\n\n\n\n<li>Central Board of Revenue was replaced by two entities: Central Board of Direct Taxes and Central Board of Indirect Taxes and Customs. Former is the ape administrative body for income taxes in India\u00a0\u00a0<\/li>\n<\/ul>\n\n\n\n<p>1991-92:&nbsp;<a href=\"https:\/\/the1991project.com\/sites\/default\/files\/2023-07\/1993%20Raja%20Cheliah%20Tax%20Reforms%20Committee%20Report.pdf\">Raja Chelliah Committee<\/a>&nbsp;examined India\u2019s entire tax landscape&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Formally called the \u2018Tax Reforms Committee\u2019, it recommended a series of tax reforms for direct and indirect taxation\u00a0<\/li>\n\n\n\n<li>The Committee though did not suggest enacting a new income tax law, only suggested various changes including but not limited to corporate taxes, interest taxation, agricultural income, and gift tax\u00a0\u00a0<\/li>\n<\/ul>\n\n\n\n<p>2009: First notable attempt to replace the IT Act, 1961&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In August 2009,\u00a0<a href=\"https:\/\/prsindia.org\/files\/bills_acts\/bills_parliament\/1970\/Direct_Taxes_Code_Bill_2009.pdf\">Direct Taxes Code Bill, 2009<\/a>\u00a0was released to the public\u00a0<\/li>\n\n\n\n<li>Alongside the First Discussion Paper was released\u00a0<\/li>\n<\/ul>\n\n\n\n<p>2010: Revised version,&nbsp;<a href=\"https:\/\/prsindia.org\/files\/bills_acts\/bills_parliament\/2010\/Direct_Taxes_Code_2010.pdf\">Direct Taxes Code Bill, 2010<\/a>&nbsp;presented in the Parliament&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Revised version incorporated some comments received on the 2009 version<\/li>\n\n\n\n<li>Direct Taxes Code Bill, 2010 referred to the Standing Committee on Finance<\/li>\n<\/ul>\n\n\n\n<p>2012: Standing Committee on Finance submitted its&nbsp;<a href=\"https:\/\/prsindia.org\/files\/bills_acts\/bills_parliament\/2010\/SCR_DTC_Bill_2010.pdf\">Report<\/a>&nbsp;on Direct Taxes Code Bill, 2010&nbsp;<\/p>\n\n\n\n<p>2014: Revised version of Direct Taxes Code Bill, 2010 was again put up for comments&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Direct Taxes Code Bill, 2010 lapsed with dissolution of the 15<sup>th<\/sup>\u00a0Lok Sabha\u00a0<\/li>\n\n\n\n<li>No clear commitment by the new BJP Govt to take the process forward\u00a0<\/li>\n<\/ul>\n\n\n\n<p>2017:&nbsp;<a href=\"https:\/\/pib.gov.in\/newsite\/printrelease.aspx?relid=173742\">Task Force<\/a>&nbsp;on Direct Tax Code setup&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Initially the Task Force was led by Mr. Arbind Modi and later by Mr. Akhilesh Ranjan\u00a0<\/li>\n<\/ul>\n\n\n\n<p>2019: Task Force&nbsp;<a href=\"https:\/\/timesofindia.indiatimes.com\/business\/india-business\/task-force-on-direct-tax-code-submits-report-to-fm\/articleshow\/70737988.cms\">submitted<\/a>&nbsp;its Report&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Report was never released to the public\u00a0<\/li>\n<\/ul>\n\n\n\n<p>2024: Ms Nirmala Sitharaman&nbsp;<a href=\"https:\/\/www.thehindu.com\/business\/Economy\/reviews-of-i-t-act-customs-may-be-ready-by-next-budget\/article68442690.ece\">announces<\/a>&nbsp;a review of IT Act, 1961<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>CBDT forms an\u00a0<a href=\"https:\/\/pib.gov.in\/PressReleaseIframePage.aspx?PRID=2062861\">\u2018Internal Committee\u2019<\/a>\u00a0to substantively review IT Act, 1961\u00a0<\/li>\n\n\n\n<li>It was announced that the review will be completed within 6 months\u00a0<\/li>\n<\/ul>\n\n\n\n<p>2025: Ms Nirmala Sitharaman&nbsp;<a href=\"https:\/\/ddnews.gov.in\/en\/centre-to-introduce-new-income-tax-bill-next-week\/\">announces<\/a>&nbsp;that new income tax bill will be introduced&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Promises that new income tax law will be based on \u2018trust first, scrutinize later\u2019 principle\u00a0<\/li>\n\n\n\n<li>New law will be substantively shorter and simpler as compared to IT Act, 1961<\/li>\n\n\n\n<li>Also indicates that the income tax bill will be referred to the Standing Committee\u00a0<\/li>\n<\/ul>\n\n\n\n<p><strong><u>Promise of Income Tax Bill, 2025:\u00a0<\/u><\/strong><\/p>\n\n\n\n<p>Nirmala Sitharaman promised the following in her Budget Speech of 2025&nbsp;<\/p>\n\n\n\n<p><em>New IT bill will carry forward the spirit of&nbsp;&nbsp;\u2018nyaya based on the concept of trust first, scrutinise later\u2019 and \u2018the new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. Also \u2018It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.\u2019 [Not verbatim]<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>1860-1886:&nbsp; Income tax was introduced in India for the first time in 1860 to overcome the financial difficulties due to First War of Independence of 1857. The period of 1860-1886 saw the Govt alternating between income tax and license tax as a source of revenue. Income tax became the preferred option when the first systematic &#8230; <a title=\"Skeletal Timeline of Income Tax Reform in India\" class=\"read-more\" href=\"https:\/\/theleagle.in\/?p=1017\" aria-label=\"Read more about Skeletal Timeline of Income Tax Reform in India\">Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_themeisle_gutenberg_block_has_review":false,"cybocfi_hide_featured_image":"yes","footnotes":""},"categories":[137],"tags":[187,25,188,94],"class_list":["post-1017","post","type-post","status-publish","format-standard","hentry","category-there-are-two-certainties-in-life-taxes-and-complaints-about-taxes","tag-income-tax","tag-it-act-1961","tag-it-bill-2025","tag-ravpratapsingh"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Skeletal Timeline of Income Tax Reform in India - TheLeagle | Eco Law Forum<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/theleagle.in\/?p=1017\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Skeletal Timeline of Income Tax Reform in India - TheLeagle | Eco Law Forum\" \/>\n<meta property=\"og:description\" content=\"1860-1886:&nbsp; Income tax was introduced in India for the first time in 1860 to overcome the financial difficulties due to First War of Independence of 1857. 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