17. Taxation of Individual Income—India Case Study

India’s individual or personal income tax has become complex over the years. It comprises various elements and branches thereof including the taxation of payroll or salaries, interest, dividends and capital gains, estate and wealth tax, inheritance and gifts. Some have been repealed. Several of them are linked to other taxes. For example, the tax on dividends has been linked to a tax on securities transactions, the wealth tax was linked to a minimum tax, though at present the wealth tax stands abolished. There also were components of presumptive tax on agricultural holdings several of which have not survived. Thus, many income-oriented taxes have been experimented with over the decades since the Income-tax Act was introduced in 1961 and implemented from 1962. Several of those experiments did not last, for example, attempts to tax fringe benefits through a tax specifically on them, and a tax on bank transactions to control the black economy had to be repealed reflecting popular demand. In the 2000s, several attempts to reform the income tax into a consolidated direct tax code have not succeeded, more often than not due to the inaction of successive governments. The hope for reform survives, however, in the present day.