Tax Policy And Economic Stabilization: A Historical Analysis Of Key Tax Reforms In India
- IJLLR Journal
- 28 minutes ago
- 2 min read
Dr. E. Ramya, Assistant Professor (Law), Chennai Dr. Ambedkar Govt. Law College, Pudupakkam, Tamil Nadu
ABSTRACT
Tax policy in India has undergone a century-long transformation, evolving from the colonial frameworks of the early twentieth century to a modern, technology-driven, compliance-oriented structure that is now on the threshold of a legislative overhaul with the introduction of the Income Tax Bill, 2025. This paper examines the evolution of reforms beginning with the Income-tax Act of 1922 and the Income-tax Act of 1961, tracing their role in shaping revenue system in India and their broader economic implications. It explores structural adjustments such as the introduction of Modified Value Added Tax (MODVAT) in 1986, the implementation of Value Added Tax (VAT) in 2005, and the Goods and Services Tax (GST) in 2017, and situates them within broader economic reforms in India. This paper analysis highlights the importance of Fiscal Responsibility and Budget Management (FRBM) Act, 2003, the enforcement of General Anti-Avoidance Rules (GAAR) in 2017, and the restructuring of personal income taxation through Section 115BAC (2020) and the abolition of Dividend Distribution Tax (DDT) in 2020. The study also evaluates the COVID-19 fiscal relief measures of 2020–21, which underscored the stabilizing role of tax policy in stabilizing the economy. Recent developments, particularly in Budget 2023, Budget 2024, and Budget 2025, mark a decisive shift toward simplification and relief for the middle class. These include the default adoption of the new tax regime, significant rebate threshold expansions from ₹5 lakh in 2019 to ₹12 lakh in 2025, enhancement of standard deductions, and the announcement of the Income Tax Bill, 2025, which will replace the outdated Income-tax Act of 1961 with effect from April 2026. Parallelly, the rationalization of GST slabs in 2025 reflects the government’s effort to balance efficiency with consumption stimulus. Together, these developments demonstrate how tax policy has consistently served as a tool for both economic stabilization and fiscal consolidation.
Keywords: Tax reforms, Goods and Services Tax (GST), General Anti- Avoidance Rules (GAAR), economic stabilization, revenue mobilization.
