Finance Act, 1987 (India)

The Finance Act, 1987, enacted in India, brought about significant changes and amendments to the country's direct and indirect tax laws. It aimed to mobilize resources, simplify tax procedures, and promote economic growth. Key aspects included alterations to income tax, wealth tax, customs duties, and excise duties.

Income Tax Amendments

A crucial amendment concerned the taxation of capital gains. The Act redefined "short-term capital asset" based on the holding period, adjusting the rules regarding the applicable tax rates. This aimed to streamline the taxation of capital gains arising from the sale of assets held for shorter durations. Furthermore, changes were made to provisions relating to deductions under Section 80C of the Income Tax Act. The Act sought to encourage savings by rationalizing the available deductions for investments in various schemes like life insurance, provident fund, and National Savings Certificates.

The Act also focused on curbing tax evasion. Measures were introduced to enhance the powers of tax authorities for search and seizure operations. The reporting requirements for certain financial transactions were strengthened, aimed at increasing transparency and enabling better tracking of potential tax evasion.

Wealth Tax Modifications

The Finance Act, 1987 also addressed wealth tax. Amendments were made to the valuation of assets for wealth tax purposes, particularly concerning immovable properties. The objective was to bring the valuation rules closer to the market value of assets, thereby ensuring a fairer assessment of wealth tax liabilities.

Indirect Tax Adjustments

Significant changes were implemented regarding indirect taxes. The Act adjusted customs duties on various imported goods, with the rationale of promoting domestic industries and correcting trade imbalances. Similarly, modifications were made to excise duties on domestically manufactured goods. These changes were driven by the government's industrial policy objectives and the need to generate revenue.

Other Notable Provisions

The Finance Act, 1987 also introduced specific provisions to stimulate particular sectors of the economy. Incentives were offered to encourage investment in priority sectors such as infrastructure and agriculture. These incentives included tax holidays, deductions, and concessional rates of taxation.

The Act included measures aimed at simplifying tax procedures and reducing administrative burdens for taxpayers. These measures included streamlining return filing processes and clarifying ambiguous provisions of the tax laws. This simplification aimed to improve tax compliance and reduce litigation.

In conclusion, the Finance Act, 1987 was a comprehensive piece of legislation that brought about significant changes to the Indian tax landscape. Its objectives were multifaceted, including mobilizing resources, simplifying tax procedures, promoting economic growth, and curbing tax evasion. The amendments touched upon various aspects of direct and indirect taxes, impacting individuals, corporations, and the economy as a whole.