Twenty-Five Years of Direct Tax Reforms in India (2001-2025)

Abstract

Tax receipts are needed to meet the basic functions of the State. During the last twenty-five years a number of reforms have been introduced in the arena of direct taxes. Direct taxes are grouped under two heads-corporation tax and taxes on income other than corporation tax. Direct tax reforms in India mainly comprise of reforms in corporation tax and reforms relating to exemption limit/threshold limit, rate structure, standard deduction, expanding tax base, improving tax collections and administrative reforms. Companies which comprise of domestic and foreign companies are subjected to flat rate. reforms in this area have mainly comprised of reduction in tax rates. An attempt has been made in India to make the concept of income as broad as possible and tax is levied on �slab system basis�. During the last twenty five years, the general trend has been to increase the exemption limit /threshold limit, revise the tax slabs tax rates in different income slabs, revise the period of holding and rates in respect of capital gains tax and has made tax administration more transparent, efficient and tax-payer friendly . As a result tax base has expended and direct tax collections have gone up considerably. However, certain areas of concern still remain which include nearly constant tax-GDP ratio, lower tax buoyancy, continued tax avoidance and evasion and problems of arrears of assessment and collections, as also pendency of appeals.�

Broadening of tax base is necessary to ensure growth of revenue . there should be sustained expansion of coverage and judicious use of differential rates. There should be complete integration of agricultural and non-agricultural incomes for tax purposes. The fight against tax evasion and corruption should be continuous and sustained and family should be the unit of assessment.�