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The new Income Tax Bill, 2025, tabled in the Parliament today, will overhaul India's personal tax laws. Union Finance Minister Nirmala Sitharaman had announced the slab-based income tax rates while presenting the Union Budget 2025.
As India's personal tax system gets a fresh overhaul in 2025, here is a look at what India's tax slabs were during 1961, when the slab-based tax rates were first introduced:
Individual Income Tax Rates in 1961
| Income Slab (Annual) in ₹ | Tax Rate |
|---|---|
| Up to ₹5,000 | Nil (No tax) |
| ₹5,001 – ₹10,000 | 10% |
| ₹10,001 – ₹15,000 | 20% |
| ₹15,001 – ₹20,000 | 30% |
| ₹20,001 – ₹25,000 | 40% |
| ₹25,001 – ₹50,000 | 50% |
| ₹50,001 – ₹1,00,000 | 60% |
| Above ₹1,00,000 | 70% |
Super-Rich Surcharge: Any individual who earned more than Rs 2 lakh per annum had to pay an addition super-rich surcharge of 10-15 per cent, thus taking the effective tax rates to a whopping 75 per cent for high-income individuals.
Individual Income Tax Rates as per Income Tax Bill, 2025
There will be no income tax payable on earnings upto Rs 12.75 lakhs (Rs 75,000 being the new standard deduction. Beyond this, here are the tax slabs:
| Annual Income (In Rs) | Tax rates |
|---|---|
| up to Rs 4 lakh | Nil |
| Rs 4 lakh to Rs 8 lakh | 5% |
| Rs 8 lakh to Rs 12 lakh | 10% |
| Rs 12 lakh to Rs 16 lakh | 15% |
| Rs 16 lakh to Rs 20 lakh | 20% |
| Rs 20 lakh to Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
Corporate Tax Rates in 1961
| Type of Company | Tax Rate |
|---|---|
| Domestic Companies | 45% – 50% |
| Foreign Companies | 55% – 60% |
| Dividend Distribution Tax (DDT) | None (but dividends were taxed in the hands of investors at individual rates) |
| ₹15,001 – ₹20,000 | 30% |
| ₹20,001 – ₹25,000 | 40% |
| ₹25,001 – ₹50,000 | 50% |
| ₹50,001 – ₹1,00,000 | 60% |
| Above ₹1,00,000 | 70% |
Capital Gains Tax in 1961
Short-Term Capital Gains (STCG): Taxed as regular income under normal slab rates.
Long-Term Capital Gains (LTCG): Flat 30% tax (without indexation benefits).
Key takeaways:
1) Ultra-high tax rates: India's tax rates in 1961 were among the highest in the world,
2) Multiple slabs with high progression: Salaries over ₹1 lakh faced 70%+ tax
3) High corporate tax: This discouraged foreign investments
4) No dividend distribution: Dividends were collected at individual rates.