History of Taxation: Ancient Communities to Modern Times

The text you provided is a brief history of taxation. It mentions that taxes on income and wealth have been levied in some form even in primitive and ancient communities. The word "Tax" comes from "Taxation" which means an estimate. Taxes were levied on the sale and purchase of merchandise or livestock and were collected in a haphazard manner. In ancient India, the system of direct taxation has been in force in one form or another. There are references to a variety of tax measures in both Manu Smriti and Arthasastra. Manu, the ancient sage, stated that the king could levy taxes according to Sastras and advised that taxes should be related to the income and expenditure of the subject. He cautioned against excessive taxation and suggested that the collection of taxes should be arranged in such a manner that the subjects did not feel the pinch of paying taxes. Kautilya's Arthasastra also deals with the system of taxation in an elaborate and planned manner.

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History of Direct Taxation
History of Taxation Pre – 1922

"It was only for the good of his subjects that he collected
taxes from them, just as the Sun draws moisture from the
Earth to give it back a thousand fold" –
--Kalidas in Raghuvansh eulogizing KING DALIP.
It is a matter of general belief that taxes on income and
wealth are of recent origin but there is enough evidence to
show that taxes on income in some form or the other were
levied even in primitive and ancient communities. The origin
of the word "Tax" is from "Taxation" which means an
estimate. These were levied either on the sale and purchase
of merchandise or livestock and were collected in a
haphazard manner from time to time. Nearly 2000 years
ago, there went out a decree from Ceaser Augustus that all
the world should be taxed. In Greece, Germany and Roman
Empires, taxes were also levied sometime on the basis of
turnover and sometimes on occupations. For many
centuries, revenue from taxes went to the Monarch. In
Northern England, taxes were levied on land and on
moveable property such as the Saladin title in 1188. Later
on, these were supplemented by introduction of poll taxes,
and indirect taxes known as "Ancient Customs" which were
duties on wool, leather and hides. These levies and taxes in
various forms and on various commodities and professions
were imposed to meet the needs of the Governments to
meet their military and civil expenditure and not only to
ensure safety to the subjects but also to meet the common
needs of the citizens like maintenance of roads,
administration of justice and such other functions of the
State.

In India, the system of direct taxation as it is known today,
has been in force in one form or another even from ancient
times. There are references both in Manu Smriti and
Arthasastra to a variety of tax measures. Manu, the ancient
sage and law-giver stated that the king could levy taxes,
according to Sastras. The wise sage advised that taxes
should be related to the income and expenditure of the
subject. He, however, cautioned the king against excessive
taxation and stated that both extremes should be avoided
namely either complete absence of taxes or exorbitant
taxation. According to him, the king should arrange the
collection of taxes in such a manner that the subjects did not
feel the pinch of paying taxes. He laid down that traders and
artisans should pay 1/5th of their profits in silver and gold,
while the agriculturists were to pay 1/6th, 1/8th and 1/10th of
their produce depending upon their circumstances. The
detailed analysis given by Manu on the subject clearly
shows the existence of a well-planned taxation system,
even in ancient times. Not only this, taxes were also levied
on various classes of people like actors, dancers, singers
and even dancing girls. Taxes were paid in the shape of
gold-coins, cattle, grains, raw-materials and also by
rendering personal service.
The learned author K.B.Sarkar commends the system of
taxation in ancient India in his book "Public Finance in
Ancient India", (1978 Edition) as follows:-
"Most of the taxes of Ancient India were highly productive.
The admixture of direct taxes with indirect Taxes secured
elasticity in the tax system, although more emphasis was
laid on direct tax. The tax-structure was a broad based one

and covered most people within its fold. The taxes were
varied and the large variety of taxes reflected the life of a
large and composit population".
However, it is Kautilya's Arthasastra, which deals with the
system of taxation in a real elaborate and planned manner.
This well known treatise on state crafts written sometime in
300 B.C., when the Mauryan Empire was as its glorious
upwards move, is truly amazing, for its deep study of the
civilisation of that time and the suggestions given which
should guide a king in running the State in a most efficient
and fruitful manner. A major portion of Arthasastra is
devoted by Kautilya to financial matters including financial
administration. According to famous statesman, the
Mauryan system, so far as it applied to agriculture, was a
sort of state landlordism and the collection of land revenue
formed an important source of revenue to the State. The
State not only collected a part of the agricultural produce
which was normally one sixth but also levied water rates,
octroi duties, tolls and customs duties. Taxes were also
collected on forest produce as well as from mining of metals
etc. Salt tax was an important source of revenue and it was
collected at the place of its extraction.
Kautilya described in detail, the trade and commerce carried
on with foreign countries and the active interest of the
Mauryan Empire to promote such trade. Goods were
imported from China, Ceylon and other countries and levy
known as a vartanam was collected on all foreign
commodities imported in the country. There was another
levy called Dvarodaya which was paid by the concerned

businessman for the import of foreign goods. In addition,
ferry fees of all kinds were levied to augment the tax
collection.
Collection of Income-tax was well organised and it
constituted a major part of the revenue of the State. A big
portion was collected in the form of income-tax from
dancers, musicians, actors and dancing girls, etc. This
taxation was not progressive but proportional to the
fluctuating income. An excess Profits Tax was also
collected. General Sales-tax was also levied on sales and
the sale and the purchase of buildings was also subject to
tax. Even gambling operations were centralised and tax was
collected on these operations. A tax called yatravetana was
levied on pilgrims. Though revenues were collected from all
possible sources, the underlying philosophy was not to
exploit or over-tax people but to provide them as well as to
the State and the King, immunity from external and internal
danger. The revenues collected in this manner were spent
on social services such as laying of roads, setting up of
educational institutions, setting up of new villages and such
other activities beneficial to the community.
The reason why Kautilya gave so much importance to public
finance and the taxation system in the Arthasastra is not far
to seek. According to him, the power of the government
depended upon the strength of its treasury. He states –
"From the treasury, comes the power of the government,
and the Earth whose ornament is the treasury, is acquired
by means of the Treasury and Army". However, he regarded
revenue and taxes as the earning of the sovereign for the
services which were to be rendered by him to the people
and to afford them protection and to maintain law and order.

Kautilya emphasised that the King was only a trustee of the
land and his duty was to protect it and to make it more and
more productive so that land revenue could be collected as
a principal source of income for the State. According to him,
tax was not a compulsory contribution to be made by the
subject to the State but the relationship was based on
Dharma and it was the King's sacred duty to protect its
citizens in view of the tax collected and if the King failed in
his duty, the subject had a right to stop paying taxes, and
even to demand refund of the taxes paid.
Kautilya has also described in great detail the system of tax
administration in the Mauryan Empire. It is remarkable that
the present day tax system is in many ways similar to the
system of taxation in vogue about 2300 years ago.
According to the Arthasastra, each tax was specific and
there was no scope for arbitratiness. Precision determined
the schedule of each payment, and its time, manner and
quantity being all pre-determined. The land revenue was
fixed at 1/6 share of the produce and import and export
duties were determined on advalorem basis. The import
duties on foreign goods were roughly 20 per cent of their
value. Similarly, tolls, road cess, ferry charges and other
levies were all fixed. Kautilya's concept of taxation is more
or less akin to the modern system of taxation. His over all
emphasis was on equity and justice in taxation. The affluent
had to pay higher taxes as compared to the not so fortunate.
People who were suffering from diseases or were minor and
students were exempted from tax or given suitable
remissions. The revenue collectors maintained up-to-date
records of collection and exemptions. The total revenue of
the State was collected from a large number of sources as
enumerated above. There were also other sources like

profits from Stand land (Sita) religious taxes (Bali) and taxes
paid in cash (Kara). Vanikpath was the income from roads
and traffic paid as tolls.
He placed land revenues and taxes on commerce under the
head of tax revenues. These were fixed taxes and included
half yearly taxes like Bhadra, Padika, and Vasantika.
Custom duties and duties on sales, taxes on trade and
professions and direct taxes comprised the taxes on
commerce. The non-tax revenues consisted of produce of
sown lands, profits accuring from the manufacture of oil,
sugarcane and beverage by the State, and other
transactions carried on by the State. Commodities utilised
on marriage occasions, the articles needed for sacrificial
ceremonies and special kinds of gifts were exempted from
taxation. All kinds of liquor were subject to a toll of 5
precent. Tax evaders and other offenders were fined to the
tune of 600 panas.
Kautilya also laid down that during war or emergencies like
famine or floods, etc. the taxation system should be made
more stringent and the king could also raise war loans. The
land revenue could be raised from 1/6th to 1/4th during the
emergencies. The people engaged in commerce were to
pay big donations to war efforts.
Taking an overall view, it can be said without fear of
contradiction that Kautilya's Arthasastra was the first
authoritative text on public finance, administration and the
fiscal laws in this country. His concept of tax revenue and
the on-tax revenue was a unique contribution in the field of
tax administration. It was he, who gave the tax revenues its
due importance in the running of the State and its far-
reaching contribution to the prosperity and stability of the

Empire. It is truly an unique treatise. It lays down in precise
terms the art of state craft including economic and
financialadministration.
History of Taxation Post 1922
1. Preliminary :
The rapid changes in administration of direct taxes, during
the last decades, reflect the history of socio-economic
thinking in India. From 1922 to the present day changes in
direct tax laws have been so rapid that except in the bare
outlines, the traces of the I.T. Act, 1922 can hardly be seen
in the 1961 Act as it stands amended to date. It was but
natural, in these circumstances, that the set up of the
department should not only expand but undergo structural
changes as well.
2. Changes in administrative set up since the
inception of the department:
The organisational history of the Income-tax Department
starts in the year 1922. The Income-tax Act, 1922, gave, for
the first time, a specific nomenclature to various Income-tax
authorities. The foundation of a proper system of
administration was thus laid. In 1924, Central Board of
Revenue Act constituted the Board as a statutory body with
functional responsibilities for the administration of the
Income-tax Act. Commissioners of Income- tax were
appointed separately for each province and Assistant
Commissioners and Income-tax Officers were provided

under their control. The amendments to the Income tax Act,
in 1939, made two vital structural changes: (i) appellate
functions were separated from administrative functions; a
class of officers, known as Appellate Assistant
Commissioners, thus came into existence, and (ii) a central
charge was created in Bombay. In 1940, with a view to
exercising effective control over the progress and inspection
of the work of Income-tax Department throughout India, the
very first attached office of the Board, called Directorate of
Inspection (Income Tax) - was created. As a result of
separation of executive and judicial functions, in 1941, the
Appellate Tribunal came into existence. In the same year, a
central charge was created in Calcutta also.
World War II brought unusual profits to businessmen.
During 1940 to 1947, Excess Profits Tax and Business
Profits Tax were introduced and their administration
handed over to the Department (These were later
repealed in 1946 and 1949 respectively). In 1951, the
1st Voluntary Disclosure Scheme was brought in. It was
during this period, in 1946, that a few Group 'A' officers
were directly recruited. Later on in 1953, the Group 'A'
Service was formally constituted as the 'Indian
Revenue Service'.
This era was characterised by considerable emphasis
on development of investigation techniques. In 1947,
Taxation on Income (Investigation) Commission was
set up which was declared ultra vires by the Supreme
Court in 1956 but the necessity of deep investigation
had by then been realised. In 1952, the Directorate of
Inspection (Investigation) was set up. It was in this year
that a new cadre known as Inspectors of Income Tax
2.1
2.2

was created. The increase in 'large income' cases
necessitated checking of the work done by
departmental officers. Thus in 1954, the Internal Audit
Scheme was introduced in the Income-tax Department.
As indicated earlier, in 1946, for the first time a few
Group A officers were recruited in the department.
Training them was important. The new recruits were
sent to Bombay and Calcutta where they were trained,
though not in an organised manner. In 1957, I.R.S.
(Direct Taxes) Staff College started functioning in
Nagpur. Today this attached office of the Board
functions under a Director-General. It is called the
National Academy of Direct Taxes. By 1963, the I.T.
department, burdened with the administration of
several other Acts like W.T., G.T., E.D., etc., had
expanded to such an extent that it was considered
necessary to put it under a separate Board.
Consequently, the Central Board of Revenue Act, 1963
was passed. The Central Board of Direct Taxes was
constituted, under this Act.
The developing nature of the economy of the country
brought with it both steep rates of taxes and black
incomes. In 1965, the Voluntary Disclosure Scheme
was brought in followed by the 1975 Disclosure
Scheme. Finally, the need for a permanent settlement
mechanism resulted in the creation of the Settlement
Commission.
A very important administrative change occurred during
this period. The recovery of arrears of tax which till
1970 was the function of State authorities was passed
on to the departmental officers. A whole new wing of
2.3
2.4
2.5

Officers - Tax Recovery Officers was created and a new
cadre of post of Tax Recovery Commissioners was
introduced w.e.f. 1-1-1972.
In order to improve the quality of work, in 1977, a new
cadre known as IAC (Assessment) and in 1978 another
cadre known as CIT (Appeals) were created. The
Commissioners' cadre was further reorganised and five
posts of Chief Commissioners (Administration) were
created in 1981.
Tax Reforms : Certain important policy and
administrative reforms carried out over the past few
years are as follows :-
(a). The policy reforms include :-
• Lowering of rates;
• Withdrawls/reduction of major incentives;
• introduction of measures for presumptive
taxation;
• simplification of tax laws, particularly relating to
capital gains; and
• widening the tax base.
(b). The administrative reforms include :--
• Computerisation involving allotment of a unique
identification number to tax payers which is
emerging as a unique business identification
number; and
2.6
2.7

• realignment of the available human resources
with the changed business needs of the
organisation.
Computerisation : Computerisation in the Income-tax
Department started with the setting up of the
Directorate of Income tax (Systems) in 1981. Initially
computerisation of processing of challans was taken
up. For this 3 computer centres were first set up in
1984-85 in metropolitan cities using SN-73 systems.
This was later extended to 33 major cities by 1989. The
computerized activities were subsequently extended to
allotment of PAN under the old series, allotment of
TAN, and pay roll accounting. These computer centres
used batch process with dumb terminals for data entry.
In 1993 a Working Group was set up by the
Government to recommend computerisation of the
department. Based on the report of the Working Group
a comprehensive computerisation plan was approved
by the Government in October, 1993. In pursuance of
this, Regional Computer Centres were set up in Delhi,
Mumbai, and Chennai in 1994-95 with RS6000/59H
Servers. PCs were first provided to officers in these
cities in phases. The Plan involved networking of all
users on LAN/WAN. Network with leased data circuits
were accordingly set up in Delhi, Mumbai and Chennai
in Phase-I during 1995-96. A National Computer Centre
was set up at Delhi in 1996-97. Integrated application
software were developed and deployed during 1997-
99. Thereafter, RS6000 type mid range servers were
provided in the other 33 Computer Centres in various
major cities in 1996-97. These were connected to the
National Computer Centre through leased lines. PCs
2.8

were provided to officers of different level upto ITOs in
stages between 1997 and 1999. In phase II offices in
57 cities were brought on the network and linked to
RCCs and NCC.
Restructuring of the Income-tax department : The
restructuring of the Income-tax Department was
approved by the Cabinet in its meeting held on 31-8-
2000 to achieve the following objectives :-
• Increase in effectiveness and productivit y;
• Increase in revenue collection;
• Improvement in services to tax payers;
• Reduction in expenditure by downsizing the
workforce;
• Improved career prospects at all levels;
• Induction of information technology; and
• Standardization of work norms
The aforementioned objectives have been sought
to be achieved by the department through a multi-
pronged strategy of :
a. redesigning business processes through
functionalisation;
b. increasing the number of officers to rationalise
the span of control for better supervision, control
and management of workload and to improve tax-
payer services and
2.9

c. re-orient, retrain and redeploy the workforce
with appropriate incentives in the form of career
advancement.
3. Important events affecting the administrative set
up in the Income-tax department:
1939
Appellate functions separated from inspecting
functions.
A class of officers known as AACs came into
existence.
Jurisdiction of Commissioners of Income tax
extended to certain classes of cases and a central
charge was created at Bombay.
1940
Directorate of Inspection (Income-tax) came into
being.
Excess Profits Tax introduced w.e.f. 1-9-1939.
1941
Income-tax Appellate Tribunal came into
existence.
central charge created at Calcutta.
1943
Special Investigation Branches set up.
1946
A few officers of Class-I directly recruited.
Demonetisation of high denomination notes
made.
Excess Profits Tax Act repealed.

1947
Business Profits Tax enacted (for the period 1-4-
1946 to 31-3-1949).
1951
Report of Income-tax Investigation Commission
known as Vardhachari Commission received.
Voluntary Disclosure Scheme introduced.
1952
Directorate of Inspection (Investigation) set up.
Inspector of Income-tax declared as an I.T.
authority.
1953
Estate Duty Act, 1953 came into existence w.e.f.
15-10-1953.
Act XXV of 1953 gave effect to the
recommendations of Commission appointed under
Taxation of Income (Investigation Commission) Act,
1947.
1954
Internal Audit Scheme in the Income-tax
Department introduced.
Taxation Enquiry Commission known as John
Mathai Commission set up.
1957
The Wealth tax Act, 1957 introduced w.e.f. 1-4-
1957.
I.R.S.(DT) Staff College started functioning at
Nagpur and much later four R.T.Is. stationed at

Bombay, Calcutta, Bangalore and Lucknow opened.
1958
LI>The Gift-tax Act, 1958 introduced w.e.f. 1-4-
1958.
Report of Law Commission received.
1959
Direct Taxes Administration Enquiry Committee
submitted its report.
1960
Directorate of Inspection (Research, Statistics &
Publications)was set up.
Two grades of Inspectors - selection and ordinary
grades - merged into one single grade.
1961
Direct Taxes Advisory Committee set up - Direct
Taxes Administrative Enquiry Committee
constituted.
Income-tax Act, 1961 came into existence w.e.f.
1-4-1962.
Revenue Audit introduced for the first time in the
Department.
New system for evaluation of work done by
Income-tax Officers introduced.
1963, 1964
Central Board of Revenue bifurcated and a
separate Board for Direct Taxes known as Central
Board of Direct Taxes (CBDT)constituted under the
Central Board of Revenue Act, 1963.

For the first time an officer from the department
became Chairman of the CBDT w.e.f. 1-1-1964.
The Companies (Profits) Sur -tax Act, 1964 was
introduced.
Annuity Deposit Scheme, 1964 introduced.
1965
Voluntary Disclosure Scheme came into
operation.
1966
Functional Scheme introduced.
Special Recovery Unit created.
Intelligence Wing created and placed under the
charge of Directorate of Inspection (Investigation).
1968
Valuation Cell came into existence in the Income
tax Department.
Report of rationalisation and simplification of tax
structure (Bhoothalingam Committee) received.
Administrative Reforms Commission set up.
1969
Direct Recruitment to Class II Income-tax
Officers made.
The post of IAC (Audit) created in the Income-tax
Department.
1970
The posts of Addl. Commissioner of Income-tax
created and abolished after one year.

Recovery functions which were hitherto
performed by Income- tax Officers, given to Tax
Recovery Officers. Prior to that State Government
officials exercised the functions of a Tax Recovery
Officer.
1971
A new cadre of posts known as Tax Recovery
Commissioners introduced w.e.f. 1.1.1972.
Report of Direct Taxes Enquiry Committee
received.
Summary Assessment Scheme introduced w.e.f.
1-4-1971.
1972
A Special Cell within the Directorate of Inspection
(Investigation) created to oversee the cases of big
industrial houses.
A new cadre of posts known as IAC(Acq.)
created and IAC appointed as Competent Authority
with the insertion of new Chapter XXA in the Income
Tax Act, 1961 on the acquisition of immovable
properties in certain cases of transfer to counter
evasion of tax.
Directorate of Organisation & Management
Services (Income- tax) created.
The post of I.T.O. (Internal Audit) created.
Bradma Scheme in the Income-tax Department
introduced.
System of Permanent Account Number
introduced.

Valuation Officers given statutory powers under
the Income-tax Act, 1961 and Wealth-tax Act, 1957.
1974
Compulsory Deposit Scheme (Income-tax
Payers) Act, 1974 introduced.
Action Plan for the Income-tax Officers
introduced for the first time.
Concept of M.B.O introduced.
1975
Voluntary Disclosure Scheme for Income and
Wealth implemented.
Special Cell for dealing with Smugglers' cases
created.
1976
Settlement Commission created and Taxation
Laws (Amendment) Act,1975 inserted a new
Chapter XIXA in the Income Tax Act w.e.f.1-4-1976.
Smugglers and Foreign Exchange Manipulators
(Forfeiture of Property) Act, 1976 introduced w.e.f.
25-1-1976.
A new scheme for departmentalization of
accounts introduced.
Chokshi Committee submitted its interim report.
1977
A new cadre of posts known as IAC
(Assessment) created.
1978

Appellate functions given to a new cadre of
Commissioners known as Commissioner (Appeals).
Directorate of Inspection (Recovery) set up.
A new directorate known as Directorate of
Inspection (Vigilance) came into existence by
bifurcating the functions of Directorate of Inspection
(Investigation).
Chokshi Committee submitted its final report.
1979
A new directorate designated as Directorate of
Inspection (Publication & Public Relations) created
out of the Directorate of Inspection (RS&P).
1980
Hotel Receipt Tax Act, 1980 came into force
w.e.f. 1.4.1981.
1981
Economic Administrative Reforms Commission
set up.
Three new Directorates viz. Directorate of
Inspection (Intelligence), Directorate of Inspection
(Survey) and Directorate of Inspection (Systems)
created.
Within the Directorate of Inspection (Income Tax
and Audit), a separate Director of Inspection (Audit)
appointed.
Directorate of Inspection (RS&P) re-organised
and Directorate of Inspection (P&PR) re-designated
as Directorate of Inspection (Printing &
Publications).

I.R.S.(DT) Staff College, Nagpur, re-designated
as National Academy of Direct Taxes.
Special Bearer Bonds (Immunities &
Exemptions) Act promulgated.
Director General (Special Investigation) and
Director General (Investigation) appointed to control
the functioning of various Directorates under the
control of Central Board of Direct Taxes.
Five posts of Chief Commissioner
(Administration) created.
A few posts of Commissioner of Income-tax were
earmarked as Commissioner of Income-tax (Inv.)
and Commissioner of Income- tax (Recovery).
1982
Special Cell within the Directorate of Inspection
(Investigation) converted into a separate Directorate
and re-designated as Directorate of Inspection
(Special Investigation).
DIT (Systems) appointed in the Directorate of
Income-tax (Organisation and Management
Services) to coordinate efforts in introducing
electronic data processing in the IT Deptt. A
microprocessor based EDP system along with data
entry system was installed heralding the era of
computerisation.
Levy of Hotel Receipts Tax discontinued.
Regional Training Institute at Nagpur started
functioning under the control of the National
Academy of Direct Taxes.
1983

The vigilance set up reorganised and the
strength of Dy. Director (Vigilance) and Asstt.
Director(Vigilance) augmented.
Computerised systems for processing challans
and PAN designed and developed.
1984
Taxation Laws(Amendment) Act 1984 passed to
streamline procedures in the interest of better work
management; avoid inconvenience to tax payers;
reduce litigation; remove anomalies and rationalise
some provisions.
1985
Post of Director General (Investigation) created
for more effective checking of tax evasion.
E.D.(Amendment) Act 1985 discontinues levy of
estate duty on deaths occurring on or after
16.03.1985.
Compulsory Deposit Scheme (Income Tax
Payers) Act 1974 discontinued w.e.f. 1.4.1985.
Interest Tax Act, 1974 discontinued w.e.f.
31.3.1985
A new "Reward Scheme" for motivating officers
introduced w.e.f. 1.4.1985.
1986
The I.T. Act and W.T. Act amended by Taxation
Laws (Amendment and Miscellaneous Provisions)
Act :-
Established Settlement Commission.
Introduced Block assets concept for depreciation.

Director of Inspection
Insp. Asstt. Commissioner of I.Tax
Appellate. Asstt. Commissioner
Income tax Officer Gr. A
Income tax Officer Gr. B
Director of Income Tax
Dy. Commissioner of Income Tax.
-Do- (Appeals)
Asstt. Commissioner of I.Tax
Income tax Officer
Four offices of Appropriate Authority for acquiring
property in which unaccounted money is invested
set up in metropolitan cities.
1987
Government's approval obtained to set up three
new benches of Settlement Commission.
L.K. Jha Committee set up for simplification and
rationalisation of tax laws.
Office of Directorate General (Tax Exemption) set
up at Calcutta.
The Direct Tax Law(Amendment) Act 1987
introduced uniform previous year and redesignated
the following authorities :-
Expenditure Tax Act 1987 brought into force.
1988
Benami Transactions Prohibition Act 1988
introduced.
The Government announced a "Time Window
Scheme" which allowed tax payers 50% rebate of

interest u/s 220(2) if they pay the tax and balance
interest. The scheme was in operation between
1.7.88 to 30.9.88.
CIT (Central) placed under the control and
supervision of Director General (Investigation).
Government decided that cadre control for Group
'C' and 'D' posts would be with Chief Commissioner
and with CBDT for Group 'A' and 'B'posts.
Extension of Direct Tax Law to the State of
Sikkim by a notification of the President of India
dated 7.11.1988.
1989
Creation of an attached office of
DGIT(Management Systems) to supervise
Directorate of I.Tax(Research, Statistics, Publication
& Public Relations) and Directorate of I.Tax
(Organisation and Management Services) from
Sept. 1989.
1990
Gift tax Bill introduced on 31.5.1990.
Creation of 65 posts of Dy. Commissioner of
I.Tax by upgradation of equal number of posts of
Asstt. Commissioner of I.Tax.
1991
Interest Tax Act, 1974 revived.
Directorate of I.Tax(Systems) started reporting
directly to Board.
1992

Rs. 1400 Presumptive Taxation scheme
introduced as a measure to widen tax base.
The post of Director General of Income-tax
(Management Systems) was abolished.
1993
40 additional posts of Commissioner of Income-
tax (Appeals) created.
Authority for Advance Rulings set up.
A comprehensive phased cadre review for Group
B, C and D initiated.
1994
2068 additional posts in Group B, C and D
sanctioned.
New PAN introduced.
Regional Computer Centres (RCCs) were set up
in Chennai, Delhi and Mumbai.
1995
New procedure for search assessment
introduced.
50 years of training commemorated and
"Seminar Twenty Five" introduced by National
Academy of Direct Taxes.
1996
77 posts of Commissioners of Income-tax
created.
Infrastructure for operational needs
strengthened.
Study report on 4th cadre review of Group 'A'
officers (IRS) of the Department prepared by

Directorate of Income Tax (Organisation and
Management Services).
1997
Rates of Income-tax reduced significantly.
Legal measures to widen tax base on certain
economic indicators introduced in selected cities.
Presumptive tax scheme discontinued.
Voluntary Disclosure Scheme 1997 introduced.
Minimum Alternate Tax introduced.
National Computer Centre (NCC) was set up in
Delhi.
1998
Sec. 260A introduced enabling direct appeals to
High Court.
1/6 Scheme & penalty for non-filing of return
introduced to widen tax base.
Gift-tax abolished for gifts made after 1.10.1998.
Kar Vivad Samadhan Scheme 1998 introduced.
Silver Jubilee of Regional Training Institutes
celebrated.
Designation of Asstt. Commissioner (Senior Time
Scale) changed to Dy. Commissioner and that of Dy.
Commissioner (Junior Administrative Grade) to Joint
Commissioner.
1999
Furnishing details of bank account and credit
cards in the prescribed form made mandatory for
refund purpose.

Prima-facie adjustments to return done away
with; acknowledgments to serve as intimations.
Samman Scheme introduced in 1999 to honour
deserving tax payers.
2000
The process of implementation of restructuring of
the Department commenced to increase efficiency
and to deal with increased workload.
Total sanctioned work force reduced from 61,031
to 58,315.
Certain rationalisation measures at structural
levels introduced.
Interest-tax Act terminated with effect from 1-4-
2000.
2001
The restructuring of the Department resulted in
reducing the stagnation at all levels and large
number of personnel were promoted in various
grades.
Jurisdiction pattern was revamped.
New posts were created at the level of DGIT/DIT
in the areas of Research, International Taxation and
Infrastructure.
2002
Computerised processing of returns all over the
country introduced.
Kelkar Committee Report, inter alia,
recommended :-
i. Outsourcing of non-core functions of the

department ;
ii. Reduction in exemptions, deductions, reliefs,
rebates etc.
The National Website of the Income Tax
Department (www.incometaxindia.gov.in) was
launched to provide a vital interface between the
Department and taxpayers.
2003
The National Website of the Department
(www.incometaxindia.gov.in) won the Silver Medal in
the category of the 'Government Websites'under the
National e-Governance Awards.
2004
As a measure of widening of tax base, the
concept of AIR (Annual Information Return) was
introduced.
Fringe Benefit Tax (FBT) was introduced as a
major step towards widening of tax base and
bolstering of the Direct Tax Collection.
Securities Transaction Tax (STT) was introduced.
2005
Tonnage Tax was introduced for the Shipping
Companies.
Banking Cash Transaction Tax (BCTT) was
introduced w.e.f. 01-06-2005.
2006
A project for enabling electronic filing (e-filing) of
Income Tax Returns was launched.

Tax Return Preparer Scheme (TRPS) was
launched to assist individuals and HUF taxpayers to
file their Return of Income.
The institution of Income Tax Ombudsman set up
in 12 cities throughout the country to look into tax
related grievances of the common public.
2007
The Refund Banker Scheme was launched in
Delhi and Patna charges.
Sevottam Scheme was launchedto standardize
service delivery to the taxpayers.
The first citizen-friendly single window Aayakar
Seva Kendra (ASK)was setup,for centralized receipt
and registration of specified categories of
documents, including income tax returns.
The Income Tax Department became the biggest
revenue mobiliser for the Government in 2007-08,
with its share increasing from 34.76%in 1997-98 to
52.75%in 2007-08.
All India Tax Network (TAXNET) was setup
connecting more than 700 offices in more than 500
cities. Consolidation of 36 (RCC) independent
regional databases into a single centralized
database (PDC or Primary Data Centre) was carried
out.
Integrated Taxpayer Data Management System
(ITDMS) for drawing of 360° taxpayer profile was
launched.
2008

Cyber Forensic Labs were setup to identify
relevant digital data during search and survey
operations, recover hidden or password protected or
deleted data and store retrieved data in a manner
so that it could be used as evidence in judicial
proceedings.
Electronic filing of Income Tax Returns Project
was awarded Silver Award in the category
"Outstanding Performance in Citizen Centric Service
Delivery" under the National e-Governance
Awardsfor the year 2007-08.
2009
Centralized Processing Centre was setup in
Bengaluru for bulk processing of e-filed and paper
returns. The Centre operates without any interface
with taxpayers in a jurisdiction – free manner.
2010
Integrated Tax Payer Data Management System
(ITDMS) was conferred the Prime Minister's Award
for 'Excellence in Governance and Administration'.
CPC Bengaluru awarded the Gold Award for
'Excellence in Government Process Re-engineering'
under the National e-Governance Awards for the
year 2010-2011.
To simplify the 50 years old Income-tax Act,
1961,'The Direct Taxes Code Bill, 2010' was
introduced in the Parliament.
2011

Foreign Tax Division of CBDT was strengthened
to effectively handle the increase in tax information
exchangeand transfer pricing issues.
Various IT initiatives were taken for efficient tax
administration. These include e-filing and e-payment
of taxes, adoption of 'Sevottam' concept by CBEC
and CBDT, web based facility for tax payers to track
the resolution of refunds and credit for pre-paid
taxes and augmentation of processing capacity.
A new simplified form 'Sugam' was introduced to
reduce the compliance burden of small tax payers
falling within presumptive taxation.
2012
Senior Citizens (not having any income from
business/profession), were exempted from payment
of advance tax.
TRACES (TDS Reconciliation, Accounting and
Correction Enabling System) launched to serve an
integrated one-stop platform for the stakeholders to
facilitate the services related to TDS operations.
2013
The Government approved the Cadre
restructuring of the Department for the creation of
20,751 additional posts and for carrying out various
measures to increase the effectiveness of the
Department.
Briefly, the salient features of the approved
restructuring are as under:
a. Number of assessment units (AUs) increased
by 1080 from 3420 to 4500, for strengthening

the tax-administration;
b. Each Range to have one more Assessing
Officer;
c. Increase in the number` of Administrative
CsIT deployed on assessment related functions
to increase from 228 to 250;
d. 114 Special Ranges to be created, with
adequate supporting manpower;
e. Creation of reserves numbering 620 created
in the IRS cadre;
f. Bifurcation of the posts of the CITs in the HAG
and SAG scales, on functional basis;
g. Upgradation of all existing 116 posts of CCsIT
in HAG+ and Apex scales along with an
increase of their number by 1 post;
h. Strengthening of the training set-up with
creation of three more RTIs;
i. Strengthening the Appellate/Advocacy
Structure by increasing the number of CIT
Appeals and providing them supporting
manpower. Advocacy structure in the ITAT to be
strengthened.
2014
New National Website of the Income Tax
Department www.incometaxindia.gov.in launched
with enhanced new features and content.
SIT to investigate Black Money in Swiss Bank
Accounts formed
Tax Administrative Reforms Commission (TARC)
headed by Dr. Parthasarathi Shome submitted its

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report of reviewing the applicability of tax policies
and tax laws in the context of global best practices
and recommending measures for reforms required
in tax administration to enhance its effectiveness
and efficiency.
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