In undivided India income tax was introduced for the first time in the year 1860. it was introduced by Income tax act 1860 and exactly the same pattern was followed that was prevailing in those days in the United Kingdom. This act came into force on 31 July 1860 and continued for only 5 years up to 1st August 1865 when it was completely withdrawn. A major characteristic of rupees 600 per annum was taxable.
Income tax was not applicable for the next two years. However it was re-imposed with certain changes in1867 and was called "The License Tax Act of 1867". Income earned up to rupees 200 per annum was not taxable under this law. Amounts earned above this limit were taxable at the rate of 2 percent. In this Act, agriculture income was exempted from tax. In 1886 its name was changed to "The Certificate Act 1868".
By virtue of this act not only that the exemption limit was raised to rupees 500 but the rate of tax was also reduced to 1.6 percent. In 1869 the certificate act was covered again into income tax act 2. Under this law agriculture income was again brought under taxation. Moreover different rates of tax were proposed on different types of incomes.
Income tax was not applicable for the next two years. However it was re-imposed with certain changes in1867 and was called "The License Tax Act of 1867". Income earned up to rupees 200 per annum was not taxable under this law. Amounts earned above this limit were taxable at the rate of 2 percent. In this Act, agriculture income was exempted from tax. In 1886 its name was changed to "The Certificate Act 1868".
By virtue of this act not only that the exemption limit was raised to rupees 500 but the rate of tax was also reduced to 1.6 percent. In 1869 the certificate act was covered again into income tax act 2. Under this law agriculture income was again brought under taxation. Moreover different rates of tax were proposed on different types of incomes.