Income Tax Day 2024: Key milestones in Indian income tax system, significance & more

Income Tax Day is observed on July 24. It commemorates the establishment of income tax by Sir James Wilson in 1860, marking a significant milestone in India's fiscal history. This year, it is the 165th occasion of National Income Tax Day.

While the initial implementation of income tax laid the groundwork, the comprehensive Income Tax Act of 1922 established a structured tax system in the country. It also laid the foundation for a systematic administration framework.

What is Income Tax?

Income tax is a tax charged on an annual income or profits earned by individuals and businesses in a financial year. Here is a simplified breakdown:

• Income from salary: This includes payments from employers to employees, such as basic pay, allowances, commissions, and retirement benefits.
• Income from house property: The income earned from renting commercial or residential properties is taxable.
• Income from business or profession: Profit earned from businesses or professional activities are liable for tax after deduction of expenses.
• Income from capital gains: Any profit from selling capital assets such as jewellery or property is taxable.
• Income from other sources: This category includes income that is not covered by the other categories, such as savings interest, gifts, family pensions, investment returns, and lottery winnings.

Key milestones in the Indian Income Tax System

• 1896: Introduction of Income Tax by Sir James Wilson
• 1922: Comprehensive Income Tax Act established
• 1924: Central Board of Revenue Act constituted
• 1946: Recruitment of Group A officers
• 1957: I.R.S (Direct Taxes) Staff College started, later renamed National Academy of Direct Taxes
• 1981: Initiation of computerisation in the Income Tax Department
• 2009: Establishment of Centralised Processing Center in Bengaluru
• 2014: Launch of the new national website of the Income Tax Department
• 2020: Introduction of the "Vivad se Vishwas" scheme to reduce litigation and generate government revenues
• 2021: Launch of the new e-filing portal

Significance of Income tax

Income tax plays an important role in nation-building, providing necessary revenue for essential services such as healthcare, education, security, and infrastructure. Income tax also promotes economic development by permitting investments in various sectors, creating job opportunities, and promoting growth.