INDIAN TAX SYSTEM
The Indian tax system is a comprehensive framework designed to mobilize resources for the government, redistribute wealth, and regulate the economy. It comprises a variety of taxes levied by both the central and state governments, encompassing direct and indirect taxes. The system aims to ensure economic growth, social equity, and fiscal stability while adapting to the evolving economic landscape.
India's tax system has undergone significant transformations since independence. The pre-independence tax structure was primarily based on colonial policies. Post-independence, the government introduced various reforms to modernize and rationalize the tax structure. Key milestones include the introduction of the Income Tax Act in 1961, the establishment of the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC), and the adoption of the Goods and Services Tax (GST) in 2017.
Taxation is a critical component of economic policy in India, serving multiple objectives that are essential for the country's growth and development. The objectives of taxation can be broadly classified into revenue generation, redistribution of wealth, economic regulation, and ensuring economic stability. These objectives help in shaping the economic landscape and addressing various socio-economic challenges.
The foremost objective of taxation is to generate revenue for the government. This revenue is essential for funding public services, infrastructure development, defence, healthcare, education, and social welfare programs.
1.Public Services: Taxes finance essential services such as policing, judicial systems, and public administration. For example, the budget allocation for public healthcare in FY 2021-22 was ₹2.23 lakh crore ($30 billion), a significant portion of which is funded by tax revenue.