Why is Income Tax Day Celebrated on July 24 in India?

INCOME TAX DAY 2022: The Income Tax Day or Aaykar Diwas was introduced in 2010 to commemorate 150 years of this tax in India. The day is celebrated with several outreach programmes and events to promote the payment of taxes and educate potential taxpayers that payment of taxes is the duty of citizens. By paying our taxes on time, we can contribute to the country’s progress.

The provision of Income Tax was introduced in India on July 24, 1860, by James Wilson to compensate for the losses incurred by the British regime during World War I. The practice continued for years before a formal structure or department was introduced for managing tax collection, in 1922. The Income-tax Act of 1922 introduced a specific nomenclature to various Income-tax authorities.

Amendments to the act in 1939 introduced two key structural changes – appellate functions were separated from administrative functions, and a central charge was created in Mumbai (then Bombay).

Income Tax collection is one of the critical components of government earning, or sourcing of funds for carrying out various development works across the country. Over the years, the system of income tax collection has gone through many changes depending on the requirement of the country.

Income Tax is levied on taxpayers based on a slab system- this means there’s a different tax rate for people with different income ranges.

In the Union Budget presented for this year, the government also introduced a new tax structure. The new tax regime, which was introduced as an optional measure for taxpayers, proposes lower tax rates on various tax slabs. To opt for the new tax structure, taxpayers must let go of the deduction applicable in the older tax regime. Taxpayers can also choose to continue to pay tax under the existing tax laws while claiming any exemptions that apply to them.

Under the new tax regime, any annual income lower than Rs 2.5 lakh is tax-free whereas in the old regime the exemption applied to yearly earnings up to Rs 2.25 lakh.

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