EVOLUTION OF INCOME TAX SYSTEM IN INDIA

Transcription

1 CHAPTER 3 EVOLUTION OF INCOME TAX SYSTEM IN INDIA 3.1 Income Tax System in India from 1860 to 1939 Income Taxation from 1860 to 1886 In its modem form, the income-tax was introduced in India for the first time in 1860 as a temporary measure to overcome the financial difficulties created by the events of Thus the credit for introducing income-tax in its modem form in India goes to the British. It may be asserted that, like the introduction of the study of English language in Indian Education, the introduction of Income-tax in the Indian financial system is one of the few happy heritages of British rule in this country '. The period from 1860 to 1886 was a period of experiment in which 23 Acts were passed in the field of direct taxation. In the year 1860, tax was levied at 2 percent on income between Rs. 200 and Rs.500 and at 4 percent on incomes above Rs.500. It is significant to note that even at that time the authorities were very careful about exemptions. Persons earning income less than Rs.200 a year from all sources (Including agriculture income) were exempt from tax. All government property was also exempted. Exemption were also granted to cultivators of land, the rent value of which was less than Rs. 600 per annum and to religious and charitable institutions. Thereafter rates were changed from time to time. This Act of 1860 lapsed in Although the income-tax of 1860 was not operated successfully, the procedure concerning levy and collection of tax was continued under different nomenclature thereafter viz. licence tax (introduced in 1867 and abondoned the next year), Certificate tax (introduced in 1868 and abondoned the next year), General Income- Tax (introduced in 1869 and abolished in the year 1873) and a licence tax on trades and professions (introduced in 1878). Agriculture Income was excluded from the licence tax '(1867) and the Act VI of 1880, applicable to whole of India together with the local Acts, raised the exemption limit to Rs. 500 per annum, but the rate continued to be 2 percent, This Act together with the local Acts remained in force till Ultimately the Act took the final form in favour of income tax since the experience, convinced the Government that income taxation had cometo form a necessary compliment of its revenues and was the only means of compelling the official and professional classes to pay taxes who prospersed most at that time. Therefore, afresh legislation was undertaken in 1886 which was the first systematic legisation on income-tax. 1. Rao, V.K.R.V. : Taxation of Income in India. Longmans Green & C.n I -td, Rnmh.iv 1Q11

2 The 1886 Act 35 Act II of 1886 was the first important landmark in the history of income-tax in our country. This act was not only a great improvement on its predecessors but its basic scheme contained the germs of the subsequent Income tax Acts also. This Act excluded agricultural income from the ambit of the income-tax which has continued to be a feature of income tax since and introduced a definition of agricultural income in almost the form in which it stands today. Income was divided in to four heads Viz., income from salaries and pensions, profits of companies, interest on securities and other sources of income including income from house property. The tax was levied on individual s different sources of income separately and not on his total income. A flat rate of 5 pies in the rupee of 192 pies (about 2.6 percent) was applied on income over Rs. 2,000/- with a rate of 4 pies on salaries between Rs.500 and Rs. 2,000. Interest on securities was also taxed at the same rate. In the year 1903 the taxable minimum was raised to Rs. 1,000.Enhanced rates of taxation by gradation or graduation were introduced in 1916 when eight different rates of tax were prescribed for the different brackets of income. The first world war also caused increase in tax rates. An additional income tax was also introduced for the first time in 1917 in the name of super-tax. This super-tax was introduced mainly with a view to raise more revenue for the government. While income-tax was being levied at step basis for super-tax the slab system was used. Till 1916, there was no penally for failure to furnish a retum(except in the case of companies) but in 1917, it was made obligatory for an assessee, with an income of Rs. 2,000, to make a return. The Act of 1886 stood in force for 32 years till 1918 with a number of amendments. IM-m&Afi! In 1918, a new act was enacted - the Act VII of 1918, which was introduced to re-cast the entire tax law. The scheme of all income if it accrues or arises or is received in British India from whatever source it is derived [Sec.3 (l)],i.e. total income, was introduced for the first time to determine the rate. The tax levy was imposed in respect of the taxable income of the year of assessment, unlike on the income of the previous year, as obtained under the earlier Acts. Section 2 of the Act contained many definitions. The terms company and previous year were defined. The term assessee included a firm and Hindu undivided family. Section 3(2) contained a list of ten items of exemptions including agricultural income. Taxable income was divided in to six heads viz., income from salaries, interest on securities, income derived from house property, income derived from business, income from professional earnings and income derived from other sources. The rates varied from four pies in the rupee to twelve pies in the rupee. This Act remained in force up to 1922 when, on the recommendations of All-India

3 36 Income-tax Committee-appointed in 1921, The Indian Income-tax Act XI of 1922 came in to being. The 1922 Act This Act of 1922 marked an important change from the Act of 1918 by shifting the administration of the income tax from the hands of Provincial Government to the Central government. Another remarkable feature of this Act was that the rales were to be enunciated by the annual finance Acts instead of in the basic enactment. This Act, like the Act of 1918 applied to all incomes except capital gains, casual income and incomes in kind not convertible in to money (except rent free accommodation). Charge in the year of assessment was established on the basis of the income of the previous year, instead of using the income of the 'previous year to make adjustment when the actual income of the assessment year was ascertained (1918 Act). The levy of Super-tax was being incorporated in the provisions of this Act now which was being assessed as a separate-tax till then and the super-tax was defined as an additional duty of income tax. The assessable entities were individual, Hindu Undivided family, company, firm and other association of individual. This Act permitted an assessee to set off loss of profits or gains under one head of income against profit under any other head, both relating to the same assessment year. Further, this Act granted relief in respect of discontinuance of a business which had been assessed under the Act of The Act of 1922 was amended as many as twenty times between 1922 and 1939 as it was realised that there were loopholes in the administration of the Act which might lead to tax-avoidance and tax evasion, and the rates of tax were also being increased since from 1921 onwards, the increasing need for government s growing expenditure compelled the taxing authority to pay more emphasis on taxes on income Thus, by 1939, these taxes occupied the second important position among Central taxes, and they made a contribution of about 20 percent of the total tax revenue to the Govt, of India. With increased taxation, more deductions, allowances and reliefs were also allowed from time to time. The Indian Taxation Hnquiry Committee was also constituted in to consider different aspects of taxation. Act VII of 1939 was an Amendment Act which was based upon the Income-tax Committee also called Aiyer s Committee s Report(1936). This Committee was appointed to make an investigation of the Indian Income-tax system in all aspects and to report on both the

4 37 incidence and efficiency of administration of the tax. The recommendations made by this committee changed the basic structure of the 1922 Act and ushered in a new era, both in the matter of incidence of tax on income and its administration. This Act of 1939, marked a departure from the past, by bringing to charge the foreign income of residents in British India. An intermediate class of assessees between residents and non-residents called resident but ont ordinarily resident created2. This Amendment Act, 1939 gave a new definition of income which was an inclusive definition. A number of different types of receipts were included in income which were not otherwise taxable/salary which was taxable on receipt basis was to be taxed on due basis according to this Act. It granted to a business, for the first time, relief by way of carry forward of loss for a period of six years. Slab system was introduced in 1939 for income-tax also and since then it is an integral part of the Indian income-tax system. Slab system is no doubt, better than step system. Under the step system, a single average rate is charged on each taxpayer s entire (total) income, increasing with the size of that income, where as under the slab system, the total income is split into slabs and progressive higher rates are charged on successive slabs of income. Roughly, to effect, progression, whereas the step system prescribes average rates, (tax liability as a percentage of income), the slab system prescribes marginal rates (the rate on the last increment of income). Under step system, when the total income just exceeds one of the levels at which the rate increases, the whole income, not merely that excess, will be taxed at a higher rate. For example, the income is Rs.l 0,000 and it is being taxed at 5 percent. If the incbme exceeds by Rs.50, the whole income of Rs.l 0,050 will be taxed at the next higher rate, e.g., 10 percent. This increase of Rs.50 in the income will increase the tax payable from Rs.500 to Rs On the other hand, under slab system an increased rate is applied only to the increase in income above a slab, the tax as percentage of the total income rises gradually as the income rises. This Act also introduced many provisions to check tax avoidance. 3.2 Income Taxation from 1939 to 1961 The drastic changes of 1939 did not prove very effective as far as the income-tax reform was concerned. Therefore, the 1922 Act was amended nine times between 1940 and 1947 and not less than twenty nine times between 1939 and Each Amendment Act passed had been of immense importance. The scheme of payment of tax in advance was introduced in 1944 and the diffrentiation between earned and unearned income in 1945 was also introduced. The scheme of provisional assessment, was introduced in Meaningsof residents, non-residents and resident but not ordinarily resident are given in Ch.4 Present structure of Income Taxation in India.

5 38 A tax on capital gains was imposed for the first time in 1946, although the concept of capital gains has been amended many times by later amendments. In 1947, the Taxation of Income (Investigation Commission) Act, 1947, was passed. The India Income Tax (Amendment) Act, 1953 (XXV of 1953), effective from 1 April, 1952, gave effect to the recommendations of this Commission. In April 1953, the Government appointed another Commission, known as the Taxation Enquiry Commission under the chairmanship of Dr. John Mathai. Its terms of reference were very much wider than those of the 1935 Committee and 1947 Investigation Commission, The main task entrusted to this commission was to examine the tax system in relation to the incidence of the tax system regarding the distribution of the burden of taxation and inequalities of income and wealth, the suitability of the tax system with reference to the developmenmt programme of the country, the effects of income taxation on capital formation and development of productive enterprise, and the use of taxation in dealing with inflationary and deflationary situations. The Finance Act of 1955 incorporated many changes recommended by this Commission and this was the beginning when the recommendations of the commission were given the effect from time to time. In January 1956, the Indian Statistical Institute invited Mr. NicholasKaldorto investigate the Indian Tax System in the light of the revenue requirement of the second five-year plan. His report was concentrated on the question of personal and business taxation. He submitted an exhaustive report for a coordinated tax system and therefore,the result was the enactment of several Taxation Acts, viz., the wealth-tax Act 1957, the Expenditure-tax Act, 1957 and the Gift-tax Act, Income-tax was also revived on Capital Gains. In 1956, The Government also referred the Act to the Law Commission in order to recast the Act on logicallines and to make its provisions more intelligible and simple without affecting the basic tax structure. The report of the Law Commission was received by the1 Government on 26 Sept Meantime, the Direct Taxes Administration Enquiry Committee, under the Chairmanship of Shri Mahavir Tyagi was appointed by the government to consider measures designed to minimise the inconvenience to assessees and to prevent evasion of income-tax. This Committee submitted its Report on 30th Nov The recommendations made in the two reports took shape in the Income Tax Act The Incomcrlax Act, 1961 The Income-tax Bill, 1961 which was submitted to the Lok Sabhaon the 24th April, 1961 was the outcome of above recommendations. On 1st may, 1961, it was referred to a Select Committee and its report was presented to the Lok Sabha on 10th August, After passing through both the House of Parliament, the Bill received the assent of the President on 13th Sep.,

6 and the Act came in to force with effect from 1st April, 1962 by replacing the Indian Income Tax Act, 1922 which had remained in operation for 40 years. The present law of income tax is governed by the Income Tax Act, 1961, which has 298 sections and 4 schedules and is applicable to whole of India including the state of Jammu and Kashmir. The search for an effective tax system answering the developing needs of the nation has led to the appointment of various committees and commissions which have led to many changes in the Act, Changes have been brought in by almost every Finance Act, AmendingActs and Ordinances. About 70 laws have been passed between 1962 to 1989 to amend the Income-tax Act, Some of these amendments were made in pursuance of the recommendations made by (i) Bhootalingham s Report on Rationalisation and Simplification of Tax Structure submitted in two parts, one dated 5th April, 1967 and the other dated 26 Dec., 1967,(ii) the Report of the Working Group of Administrative Reforms Commission on Central Direct Taxes Administration, headed by Shri Mahavir Tyagi (1969), (iii) the Report of the Direct Taxes Enquiry Committee (1971), under the chairmanship of Justice K.N.Wanchoo, regarding unearthing black money, preventing evasion and avoidance of taxes, and reducing arears, (iv) the Committee on Taxation of Agricultural Wealth and Income (1972), (v) the Interim Report (1977) and final Report (1978) of the Direct Tax Laws Committee headed by Shri C.C Chokshi, (vi) the Report of the Enquiry Committee under the Chairmanship of Shri Bhoothaligam regarding changes in the concepts of the financial year and the previors year, (vii) Economic Administration Reforms Commission, called L.K.Jha Commission (1981), which submitted its report in 1983, (viii) a long term fiscal policy, announced by the government and laid before the Parliament on 19th Dec, 1985,(ix) a White paper enunciating government s policy published in 1986, and (xx) Direct Tax Laws (Amendment) Act, 1987 and A study on black money was published in March 1985 by the National Institute of Public Finance and Policy in India, with contributions by Dr. RJ.Chelliah. An expert Committee was also constituted in 1989 on revision of tax reforms, which submitted the interim report in The Tax Reforms Committee was also appointed in 1991 under the Chairmanship of Sh. Raja J.Chelliah which submitted its Final Report Part-I in Aug, 1992, and final Report Part- II in January Some of the recommendations of the Tax Reforms committee have already been implemented in subsequent budgets. This Committee is basically concerned with the question of administrative reforms with respect to both direct and indirect taxes. The Committee also presents detailed and specific recommendations for important changes in India s tax structure. The essence of these changes is to lower nominal rates and to broaden tax-base. This Committee is also in favour of progressive income taxes. Therefore, even the Income-tax Act of 1961, which was then considered to be very comprehensive, had to be amended from time to time.

7 40 The 1961, Act has enlarged the number of categories of assessable entities to seven as against six of the 1922 Act, including every.artificial juridical person, who has not been included in the six categories, i.e. residuary class3. A scheme of self-assessment was introduced which, in course of time, displaced the scheme of provisional assessment. Provisions regarding advance tax, interest and penalty were made more rigorous. Regarding reopening of back assessment for escaped income, the Act retained the limit of eight years where the assessee has failed to make a return or failed to disclose all meterial facts. The procedures for assessment were completely recast in April 1989, i.e., assessment year Income-tax revenue originates mainly from two taxpaying entities Viz., Companies and Individuals - Hindu Undividedfamily, Registered firms and others contribute very little. Since this study is concerned with Individuals - which account for more than 99 % of the 'Salaried- Class - 'Companies are not taken in to account Some Salient Feature of the Rate Structure of Income -Tax on Individual in India : The rates of income-tax as well as the slabs have undergone frequent changes from time to time. In pre-independence time, the tax system was designed with the single main objective of raising sufficient amount of revenue for expenditure of Government for administration and allied services. The position, however, has completely changed in post-independence period. In designing the tax system, Government took into consideration the objective of growth with social justice, which led to the frequent changes in the income-tax structure from time to time. Besides, the tax on income was levied in a variety of ways viz. income-tax; surcharge on income-tax; super-tax; surcharge on super-tax; surcharge on earned incomes; surcharge on unearned incomes; additional surcharge; special surcharge etc. The Finance Act,1963, imposed additional surcharge for the assessment year This levy of additional surcharge was closely connected with the Compulsory Deposit Scheme (1963), which gave place to Annual Deposit for the assessment year and onwards. Although the main objectives of the above mentioned ways adopted, were to withdraw the purchasing power on account of prevailing inflationary pressures on the economy and to make large funds available to the public sector, the system became complicated year by year. 3. Details are given in 4th Chapter, Present structure of Income Taxation.

8 41 To simplify the system, super-tax was subsequently integrated with income-tax by the Finance Act, 1965 that is, effective from the assessment year The distinction between earned and unearned incomes, introduced in 1945, was completely abolished from April 1,1968. Now there was only one type of surcharge and one kind of tax, that is, income-tax was levied at varying rates on different slabs of incomes and a surcharge was added at a prescribed rate upon the tax so computed to arrive at the total tax liability. An attempt has always been made by the Government to keep the incidence of tax at a relatively lower level for persons in the lower income groups. Therefore, a minimum exemption limit all individuals having prescribed income are not subject to tax has always been provided by the different Income-Tax Acts. Since 1947, exemption limit has been gradually raised. At the time of introduction of the Income-Tax Act, 1961, exemption limit was Rs.3,000 for individual and Rs. 6,000 for Hindu Undivided Family. From the assessment year , these exemption limits were subject to the provision of family allowance computed in accordance with the personal circumstances of an individual. More concession was given to married individual with two or more children compared to unmarried one or married having one child. Under the Finance Act 1965, every individual got relief on account of personal allowance in terms of amount of tax otherwise payable depending upon the marital status. This was in addition to a minimum exemption limit. This scheme of personal allowance was discontinued by the Finance Act, 1970 and first tax free slab was prescribed for the first time for the assessment year for individuals whose income up to Rs.5,000 was fully exempt from tax whatever their marital status may be. This step further simplified the system. Since, the Direct Taxes Enquiry Committee (1971), popularly known as Wanehoo Committee, recommended reduction in the rates of direct taxes which were mainly responsible for tax evasion because they made tax evasion more attractive, the maximum marginal rate of income-tax on individual was reduced from 97.7 per cent in the assessment year to 66.0 per cent in on income exceeding Rs.l Lac [ Government of India, Finance Acts (various years)]. The number of slabs was reduced to 7 from 8 in the budget of In the number of slabs became 4 and now it is 3, i.e., in the budget of This is also an important step towards the simplification of tax system.

9 42 The exemption limit for individuals has been continuously enhanced from Rs. 5,000 for the assessment year to Rs.6,000 for the assessment year and to further Rs. 12,000 for the assessment year The following table 4 depicts the exemption limit provided under the law and the range of marginal tax rates applicable to individual tax payers in different assessment years from to

10 43 Table 4 Range of Marginal Tax Rates Applicable to Individual Taxpayers in the Assessment years to Assessment Years Exclusive of Surcharge (Percent) Surcharge On Income Tax(Percent) Inclusive of Surcharge (Percent) Exemption Limit (In Rs 000) ' and and Nil and and * Notes : 1. If income does not exceed Rs. 10,000, it is treatedas exempt. 2. If Income does not exceed Rs.12,000, it is treatedas exempt. 3. Applicable only if the taxable income exceeds Rs.50,000 and otherwise Nil. 4. Applicableonly if the taxable incomeexceedsrs. 75,000 and otherwise Nil. 5. Applicableonly if the taxableincomeexceedsrs. 75,000 and otherwise Nil. 6. Applicableonly ifthetaxableincomeexceeds Rs. 1,00,000 and otherwise Nil. *. No surcharge is leviable from A.Y and maximum marginal rate is applicable to income over Rs. 1,20,000 (which is over Rs. 1,00,000 for all the previous assessment years mentioned above). Source : Budget of Union Government of India, for different years. *

11 44 The maximum marginal tax rate (exclusive of surcharge) was 60 percent from the assessment year to and the rate inclusive of surcharge varied from 72 percent to 67,50 percent because of variation in the rate of surcharge. Subsequently, maximum marginal tax rate has been brought down to 40 percent. Marginal tax rates at low income levels continued to rise in early eighties and reached at 33 percent in the year and remained same till , Subsequently, marginal tax rates at low income levels also continued to decline like maximum marginal tax rates resulting in 20 per cent in the assessment year and further, 15 percent in the assessment year This decline in the rate of income tax on individuals in the first income slab, i.e., between Rs to Rs.60Q00 in the assessment year , as compared to the assessment year , has reduced the tax liability on different income levels. The table 5 reveals the impact of reduction of tax rate in the first income slab in the case of individuals. Table. 5 Tax Liability in the case of individuals at Different Income Levels in the Assessment Year and , and the Resultant Relief. in Rs. Total Tax Tax Relief Income Liability in Liability in Amount % the assessment the assessment year year

12 45 Five percent decline in the rate of income tax on individuals, as compared to previous year, in the first income slab caused 25 percent relief from income tax up to the income level of Rs (first income slab) in the assessment year With the increase in the level of income from Rs to Rs , tax relief declined from 11.8 percent to 1.9 percent respectively. The exemption limit for individual income tax payers has been substantially raised during the period to from Rs. 8,000 to Rs.40,000. While the range of marginal tax rates exclusive as well as inclusive of surcharge in the assessment years to is shown in table 4, the marginal tax rates by income brackets are presented for the same period in table 6.

13 46 Iabk-6 Marginal Tax Rates Applicable to Individual Taxpayers in the Assessment Years to (Percent) Taxable Income & Assessment Years to On the first Rs. 10,000 Nil Nil Nil Nil Nil Nil On the next Rs. 2, Nil ' Nil Nil Nil Nil On the next Rs. 2, Nil Nil.Nil ' Nil Nil On the next Rs. 2, Nil On the next Rs Nil On the next Rs. 2, On the next Rs. 5, On the next Rs. 5, On the next Rs. 5, On the next Rs. 5, On the next Rs. 10, On the next Rs. 10, On the next Rs. 10, On the next Rs. 10, On the next Rs.5, On the next Rs. 15, On the next Rs.20, Over Rs. 1,20, ' Contd...

14 47 :- Tablfc.6 Taxable Assessment Years. Income & On the first Rs. 10,000 Nil Nil Nil Nil Nil Nil Nil On the next Rs.2,500 Nil Nil Nil Nil Nil Nil Nil On the next Rs.2,500 Nil Nil Nil NiL Nil NiL Nil On the next Rs.2,500 Nil Nil Nil Nil Nil Nil Nil On the next Rs.500 Nil Nil Nil Nil.Nil Nil Nil On the next Rs.2, Nil Nil Nil. Nil Nil Nil On the next Rs.5, Nil Nil Nil Nil Nil On the next Rs.3, Nil Nil Nil Nil Nil On the next Rs.2, Nil Nil Nil Nil On the next Rs.5, Nil ' Nil Nil On the next Rs.5, Nil Nil On the next Rs. 10, On the next Rs. 10, On the next Rs. 10, On the next Rs. 10, On the next Rs.5, On the next Rs. 15, On the next Rs.20, Over Rs. 1,20, Note: The marginal tax rates presented here do not include surcharge or special surcharge: if any. Source : Budget of Union Government of India, for different years. Both the tables (5 & 6) given above reveal the declining marginal rates of income-tax on individuals in India. But the general impression that India is a highly taxed nation is still true in regard to rate of income-tax on individuals. The following table 7 reveals the different income-tax rates on individual in OECD member countries.

15 48 Table? Rate Schedules of Central Government Income Tax on individual in different countries Country Lowest Rate of Income tax on Individuals, Highest Rate of Income Tax on Individuals Australia Austria Belgium Canada Denmark Finland 7.0 ^ 39.0 France 5.0. Germany 19.0 ti wana. p3.0 Greece 5.0 *fc #0.0 Iceland India Ireland Itlay Japan Luxemburg Mexico Netherlands Newzealand Norway Portugal Spain Sweeden Switzerland Turkey United Kingdom United States OECD Average * Notes : 1. * Unweighted 2. For comparison with India, member countries of OECD have been chosen for convenience as the data for these countries are readily available. 3. OECD stands for Organisation for Economic Co. operation and Development. Source: Revenue Statistics of OECD Member Countries, OECD, Paris, 1994.

16 49 A comparison of personal income tax rate in India with OECD member countries reveals that still India comes in the list of Highly Taxed Nations. Although rates of personal income tax (lowest as well as highest) in India are lower compared to some OECD member countries, because these rates have been declined in India compared to previous years, still the lowest as well as the highest rates are higher than the OECD average rates(lowest as well as highest). Which proves the comparatively heavy burden of income-tax on individual tax-payers in India. To reduce the burden of income - tax on individuals, besides raising the exemption limit, scope of deductions has also been widened and the ceilings have been raised from time to time. For Example, the ceiling on the amount of investment in specified assets that qualifies for a graded deduction up to assessment year (Sec.^Gp^WSs^sed from Rs. 10,000 in to Rs.40,000 with effect from The ceiling on allowable deduction of intereslsdiumbend received from some specified assets has been raised from Rs.5,000 in to Rs. 9,000 in to 13,000 with effect from the year and subsequently it has been enhanced to Rs. 15,000 with effect from the assessment year The list of specified assets have also been enlarged. With effect from the assessment year the system of itemised expense deduction with respect to expenditureincidental to earning salary income has been replaced by a standard deduction based on the salary income. The ceiling on the amount of standard deduction has been raised from Rs.3,500 in to Rs.5,000 in , Rs. 12,000 in and subsequently to Rs. 15, /3 % of gross salary, whichever is less,in case of salaried women Rs. 18,000 or 331/3 % of gross salary, whichever is less, having income upto Rs.75,000) with effect from theassessment year Standard deduction has been raised to Rs. 18,000 for persons drawing salary up to Rs.60,000 in the current budget for the assessment year , which will provide relief to the low -paid salaried employees. Thus, a salaried employee with an income of Rs per year, making the minimum contribution to his provident fund, will now pay no tax at all. If he has no savings, he will still pay only Rs After reviewing the evolution of income tax system and analysing the changes occurred from time to time in the structure of income tax, now we will discuss the present structure of income tax in India and its justification. 4. This section (80 C) was applicable up to the assessment yearl The same investments and contributions (specified under sec. 80 C) are now eligible for rebate from tax under section 88 from the assessment year Finance Minister s Budget Speech, Union Budget,