The history of India’s income-tax rates is fascinating. From as high as 99.75% and 11 tax slabs to a minimum of 5% and 3 tax slabs, the rates were changed several times.
Below mentioned are the 11 main scenarios where the tax rates changes in India after Independence.
- The first one is from 1949-50. India’s first finance minister, John Mathai, reduced Anna income tax up to ₹10,000. In the first slab, the reduction was made of an Anna with nine pies and two Annas with "nine pies" on the second plate.
- In 1974-75 several changes were made into the income tax rates. Below mentioned are some highlighted ones:
- The maximum Income tax rate was lowered to 75% from 97.75%
- Taxes were reduced at all slabs of income tax.
- There was no income tax for individuals who earned up to ₹6,000.
- The basic rate of income tax was maintained on the income slab at over 70,000 rupees to 70%.
- The surtax rate was reduced to 10% for all levels.
- The joined impact of income tax and premium would be 77% of taxable income in the highest slab.
- In 1985-86, these changes were made: The income tax slabs were reduced from eight to four.
- In 1992-93, it started to look a lot like the current tax structure. Then Finance Minister Dr. Manmohan Singh brought in several changes to the income tax structure as he reduced the number of slabs from four to three. The new slabs now went from zero tax for those earning less than ₹30,000 a year to 40% tax for those earning above ₹1 lakh.
- In 1994-95, after a two-year gap, Dr. Manmohan Singh adjusted the tax slabs slightly but he left rates unchanged. Now, anyone earning above ₹1.2 lakh per annum would be in the 40% tax bracket and anyone earning less than ₹35,000 would pay zero tax.
- In 1997-98, P. Chidambaram presented the 'Dream Budget'. This budget brought down the highest tax bracket from 40% to 30% and exemption bracket for the lowest slab was also increased to ₹40,000 per annum from ₹35,000 earlier.
- In 2005-06, after almost 10 years, Chidambaram again announced essential changes in the tax rates. Now, the bracket for zero tax had swelled to ₹1 lakh per annum but those earning more than ₹2.5 lakh would pay tax in the higher bracket of 30%.
- In 2012-13, Pranab Mukherjee not only increased the exclusion limit of individual taxpayers from ₹1.8 lakh to ₹2 lakh but also slightly modified the tax brackets.
- In 2014-15, with the adoption of the 2015 Finance Act, the wealth tax was eliminated from the 2016-17 taxation year.
- In 2017-18, Finance Minister Arun Jaitley introduced the current rate of taxation for individuals. Small tweaks have been made since then. The most prominent among these has been the tax rebate of ₹12,500 that effectively ensures that those earning up to ₹5 lakhs do not have tax liability.
|Income Bracket||Tax Rate|
|Less than ₹ 2,50,000||Nil|
|Between ₹2,00,001 to ₹5,00,000||5%|
|Between ₹5,00,001 to ₹10,00,000||20%|
|More than ₹10,00,000||30%|