Income Tax Bill 2025: Delving into Historical Tax Rates and the Proposed New Structure

Income Tax Bill 2025: Delving into Historical Tax Rates and the Proposed New Structure

The fiscal landscape of India is poised for a significant alteration with the unveiling of the Income Tax Bill 2025. As discussions surrounding this pivotal legislation intensify, it becomes pertinent to examine the historical context of taxation within the nation, particularly the zenith of income tax rates witnessed in the annals of Indian economic history. In the year 1961, a markedly different economic paradigm prevailed. During this era, individuals fortunate enough to earn in excess of Rs 1,00,000 annually were subject to a formidable income tax rate of 70%. This figure, representing the highest tax rate levied in 1961, underscores the significantly progressive nature of the tax regime at that time.

To put this historical rate into perspective, consider the income tax slabs prevalent in 1961:

Income Slab	Income Tax Rate
Up to ₹3,000	Nil
₹3,001 – ₹5,000	3%
₹5,001 – ₹10,000	5%
₹10,001 – ₹15,000	8%
₹15,001 – ₹20,000	10%
₹20,001 – ₹30,000	15%
₹30,001 – ₹40,000	20%
₹40,001 – ₹50,000	25%
₹50,001 – ₹70,000	30%
₹70,001 – ₹1,00,000	40%
Above ₹1,00,000	70%

Source: Deccan Heral

Fast forward to the present day, and the proposed Income Tax Bill 2025 introduces a revised tax structure, ostensibly designed to foster economic growth and simplify compliance.           

The salient features of this new tax rate regime are detailed in the following table:

Income Slab	Income Tax Rate
Up to ₹4 lakh	Nil
₹4 lakh – ₹8 lakh	5%
₹8 lakh – ₹12 lakh	10%
₹12 lakh – ₹16 lakh	15%
₹16 lakh – ₹20 lakh	20%
₹20 lakh – ₹24 lakh	25%
Above ₹24 lakh	30%

Source: Deccan Herald

This proposed tax structure under the Income Tax Bill 2025 marks a considerable departure from the historical peak of 70% witnessed in 1961. The tiered system suggests an attempt to balance revenue generation with considerations for different income levels within the contemporary Indian economy. Whether this new framework will effectively achieve its intended objectives remains a subject of ongoing debate and analysis.

Article Credit: This article is based on information from the Deccan Herald article "Income Tax Bill 2025: This was the highest tax rate in 1961".