Finance Bill 1987: Key Provisions

The Finance Bill 1987, presented by then Finance Minister Rajiv Gandhi, aimed to stimulate economic growth, simplify tax structures, and provide incentives for savings and investment. It addressed various aspects of direct and indirect taxation, reflecting the government’s economic policies of the time.

Direct Tax Amendments

A key focus was on rationalizing the income tax structure. The Bill sought to simplify tax slabs and reduce the overall tax burden on individuals, especially those in lower and middle-income groups. The intention was to encourage greater tax compliance and reduce tax evasion. Significant changes were made to the taxation of perquisites provided to employees, aiming to bring more transparency and uniformity in their valuation.

The Bill also introduced modifications related to capital gains tax. Amendments were brought forth concerning the definitions and treatments of different types of capital assets. This was done to incentivize long-term investments and to streamline the process of assessing capital gains tax liability. Provisions related to depreciation allowance were also adjusted, taking into account the changing economic environment and technological advancements.

To encourage industrial development, the Finance Bill 1987 proposed certain tax concessions and incentives for specific industries, particularly those located in backward areas. This aimed to promote regional development and reduce economic disparities. The Bill also addressed issues related to the taxation of charitable trusts and institutions, aiming to prevent misuse of tax exemptions and to ensure that funds were used for genuine charitable purposes.

Indirect Tax Adjustments

On the indirect tax front, the Finance Bill 1987 contained several proposals related to customs and excise duties. Changes were made to the duty structures on various goods, with the aim of promoting domestic industries and discouraging imports of certain items. The Bill sought to streamline the procedures related to excise duty collection and assessment, aiming to reduce administrative burden and improve efficiency.

Specific adjustments were made to excise duties on items like textiles, tobacco products, and petroleum products. These changes reflected the government’s policy objectives in these sectors, such as promoting handloom textiles, discouraging consumption of harmful products, and managing the prices of essential commodities. The Bill also included provisions related to anti-dumping duties, aiming to protect domestic industries from unfair competition from imported goods.

Impact and Legacy

The Finance Bill 1987 had a significant impact on the Indian economy. The tax reforms initiated through the Bill influenced subsequent fiscal policies and contributed to the overall modernization of the tax system. The focus on simplifying tax structures and providing incentives for savings and investment helped to promote economic growth and development. While the Bill faced criticism for certain provisions, it played a crucial role in shaping the Indian economy during a period of significant transformation.