Genesis of the Indian Taxation System

Indian Taxation System

People generally think that taxes paid in today’s time are of recent origin but there are lot of proofs and evidences from the past scenario that show taxes on income or other forms were also levied in ancient time.

Word taxation means an estimate, however there was no systematic procedure or manner of collecting it, in ancient times an order used to be passed from Ceaser Augustus (Roman Emperor) that the people in the world should be taxed and it was levied as per the occupation or turnover of businesses. These taxes were imposed to meet the needs of common citizens as well as administrative, civil and military expenditures of the government.

Direct taxation in Indian taxation system came from ancient time. Manu Smriti and Arthasastra were two references which could help in understanding the taxation system from ancient time

  • Manu was the law giver person who advised his kingdom about the levy of tax on income and expenditure of people. According to him, the king was required to impose taxes on traders, artists and agriculturists depending upon their livelihood and situations. Tax was paid in the form of gold and silver coins, livestock’s, raw-materials and also by providing personal services.
  • As per his views or opinions, excessive Indian taxation system or nominal taxation system both are dangerous for the kingdom.

So, he preferred that people did not feel burden by paying them. His analysis and planned tax structure showed that there was proper manner of Indian taxation system in past time also.

  • Kautilya’s Arthasastra helped the Mauryan Empire in ruling its states in a most efficient and effective way. Kautilya dealt with financial matter of his states. He promoted the trade and commerce of his empire by foreign countries dealing. Goods were purchased from china and other countries by levying tax on all foreign commodities imported in the country.
  • Moreover the concerned persons who imported foreign goods paid taxes called Dvarodaya. States collected a lot of duties called water rates, octroi duties, tolls and customs duties, agriculture & forest produce, tolls, road cess, ferry charges.
  • The major sources of revenue for the states were salt tax and it was collected from place of its extraction. Sale tax, Excessive profit tax and a tax called yatravetana was levied on the pilgrims too. Revenue was collected from all the possible sources not to over burden the people rather provide his kingdom and their state immunity from outside danger. Empires spent the revenue on construction of roads, villages, educational facilities and all other benefits to their kingdom and society.

He emphasized on equity and justice in Indian taxation system. Those who were disabled or suffering from dangerous diseases were exempted from paying taxes altogether. Goods used on marriage or funeral, articles and gifts were also exempted from being subject to taxes. His taxation system is also some way similar to the modern, present day Indian taxation system where offenders and tax evaders were highly penalized. Thus we may conclude that Kautilya’s Arthasastra was the first authoritative narration of history which the fiscal laws were formulated. His concept of collecting revenue was a unique way of managing the administrative system. He helped in contribution to the prosperity and stability of his Empire and laid down the footmark in the history of economic and financial system.