This Day in History (31-Dec-1695) – A window tax is imposed in England, causing many shopkeepers to brick up their windows to avoid the tax

Window tax was introduced in England and Wales in 1696 under King William III. It was designed to impose tax relative to the prosperity of the taxpayer, but without the controversy that then surrounded the idea of income tax. At that time, many people in Britain opposed income tax, because they believed that the disclosure of personal income represented an unacceptable governmental intrusion into private matters, and a potential threat to personal liberty.

When the window tax was introduced, it consisted of two parts: a flat-rate house tax of 2 shillings per house (equivalent to £12.11 in 2014), and a variable tax for the number of windows above ten windows in the house. Properties with between ten and twenty windows paid a total of four shillings, and those above twenty windows paid eight shillings. The flat-rate tax was changed to a variable rate, dependent on the property value, in 1778. People who were exempt from paying church or poor rates, for reasons of poverty, were exempt from the window tax. Certain rooms, particularly dairies, cheeserooms and milkhouses were exempt providing they were clearly labelled, and it is not uncommon to find the name of such rooms carved on the lintel. The bigger the house, the more windows it was likely to have, and the more tax the occupants would pay.

Architects responded to the tax by designing houses with fewer windows, and careful or impecunious householders bricked up some existing windows. As early as 1718 it was noted that there was a decline in revenue raised by the tax due to windows being blocked up. In 1851, it was reported that the production of glass since 1810 remained almost the same despite the large increase population and building of new houses. The complaints from the medical profession and enlightened individuals rapidly grew as the industrial revolution and urbanisation created mass housing and crowded cities, and raised the spectre of epidemics. They argued that the lack of windows tended to create dark, damp tenements which were a source of disease and ill-health. The campaigners argued that it was a ‘tax on health’, and a ‘tax on light and air’, as well as being an unequal tax with the greatest burden on the middle and lower classes. The campaigners eventually won the argument and in 1851 the Act was repealed and replaced by a house tax.


This Day in History (1-Apr-1869) – Income Tax was imposed

The present tax system in India virtually owes its’ origin to the British legacy. The prevailing economic scenario that existed in the post Sepoy Mutiny period forced the British rulers to impose a tax on income to augment government funding. Accordingly, in the year 1860, an Act to tax income was passed. Income arising out of profits from trade profession and property was taxed fixing the basic exemption limit of income for taxation at Rs.500.  The Act was in operation till 1865 when it ceased to exist.

However in the year 1867, again due to the demanding situation of the economy a Licence Tax was imposed for identical purposes for one year and thereafter, with effect from 1st April 1869 an Act to impose Income Tax was reintroduced with variable rates for different ranges of income slab starting from Rs.500 to Rs.1,00,000 and above. Finally, as an outcome of the recommendations of All India Income tax Committee formed in 1921, by Act XI of 1922 Income Tax Act 1922 was enacted merging two existing Acts on Income Tax and Super Tax. In this Act apart from laying a foundation and making a proper tuning of the administrative machineries and functionaries, the operative portion of the statute was also given a more meaningful rationale. Concept of ‘previous year’, ‘income’, ‘taxable income’, ‘total income’, obligation of an ‘employer’ were all introduced .

Due to the impact of flow of money in few hands in the post second world war period and after the independence of the country in 1947, it was felt necessary both to augment government funding and to have a control on the economy with certain checks and balances. The 1922 Act was found to be inadequate. In 1954 John Mathai Commission or Taxation Enquiry Commission was set up to carry out an in depth study of the tax laws and their administration. Thereafter in 1956 at the request of the Government of India, famous economist Prof Nicholas Kaldor made an examination of the tax policies of the country and made quite a number of proposals for broadening the tax base and removing the prevalent inequalities. The primary structure of the present day tax system mostly depended on these studies and recommendations. Resultantly, Income Tax Act 1961 was enacted in the Parliament which came into operation with effect from 1st April 1962.