An picture has been making rounds on social media platforms by which it has been alleged that in 1971-72, when Congress chief Indira Gandhi was the Prime Minister of India if anybody earned Rs 10 lakhs, she or he would find yourself paying over 9.33 lakhs as taxes. The data began making rounds on social media in 2020 after Congress chief Shashi Tharoor took a jibe at Finance Minister Nirmala Sitharaman and posted Income Tax charges of 1945.
Source: Twitter
In the replies, Twitter consumer Ankur Singh had posted the picture of 1971-72 tax slabs which might be nonetheless making rounds on the social media platforms. If his tweet is to be believed, throughout that interval, anybody with an earnings of over ten lakhs will find yourself paying 85% tax and 10% surcharge making it 95% in complete.
Source: Twitter
In 2020, Fact Hunt did an in depth evaluation of the Tax Slabs in 1971-72. During their investigation, they discovered that the picture was, in truth, true. Then-Prime Minister Indira Gandhi, who was additionally the finance minister throughout that interval, had introduced the non-public earnings tax slab charges throughout her Union Budget speech on February 28, 1970.
As per the non-public earnings tax slab charges for the Financial yr 1970-71 (The evaluation Year 1971-72), the earnings tax price was 10% for anybody with earnings between 5,000 to 10,000. The earnings tax price elevated on the interval of an extra 5,000 within the earnings, and people who had been incomes Rs 30,001 to 40,000 had been paying 50% of their hard-earned cash as taxes. As the earnings slab went greater, the tax price stood at 85% of the overall earnings for many who had been incomes Rs 2 lakh and above.
The essential factor to notice right here was that the federal government at the moment had additionally imposed a ten% surcharge on the earnings if the overall earnings exceeded Rs 5,000.
The authorities needed to undertaking a pro-left picture
According to a report in Observer Research Foundation, Congress had cut up in 1969. At that point, the federal government needed to indicate its pro-left picture the place wealth creators are typically seen as parasites. The report learn, “This was completely in tune with a politics that saw wealth creators as parasites and high income earning and tax-paying citizens as evil and believed in the distribution of wealth without creating it.”
“The intellectual framework for high taxes was set by Finance Minister CD Deshmukh two decades earlier in his February 27, 1953, Union Budget speech, where he set up the Taxation Enquiry Commission under the chairmanship of John Mathai, with six other members, including VKRV Rao, who recommended a maximum marginal rate of 13.5 annas in the rupee or 85 per cent on incomes above Rs. 150,000, which seemed to them “as far as one can go in present circumstances.” But even excessive taxes weren’t sufficient,” it additional added.
Further, in 1973-74, the very best tax slab for a person touched sky-high at 97.50%. It is noteworthy that in that interval, such excessive tax charges discouraged the taxpayers from actively taking part in nation-building by paying taxes. Corruption and tax theft turned a norm, and even in the present day, the federal government is commonly seen as evil with regards to taxes.
It was solely after the suggestions of the Tax Reform Committee, 1991 that the tax charges got here down and solely three tax brackets of 20%, 30% and 40% had been launched in 1992-92. Further, it was diminished to 10%, 20% and 30% in 1997-98.
