Indias Taxation Policy 1950-1990 Was formed primarily to meet the financial needs of the country in the postindependence

period. The problem faced was how to mobilize adequate financial resources to finance the development programmes chalked out in 5 year plans. Financial resources has to be increased 4 times, so that rate of capital formation could be stepped up from 5% of national income to say 20%. The known source of development finance taxation, domestic borrowing, external borrowing on foreign aid had the potentials of yielding adequate development finance. Taxable potential was very low as income was low and per capita borrowing was lower. The repayment near slow. So taxation policy was formulated. Revenue function Revenue collection is the primary objective of Indias tax policy. The state and central government levies taxing power extensively and intensively. The taxes imposed are from 1950, 1. estate duty 2. Wealth tax 3. Gift tax 4. Expenditure tax 5. Capital gains tax A tax rates were imposed on direct indirect taxes. Central Excise duty is imposed on all imaginable non-agriculture products. High import duty is imposed on almost all items of exports. Estate government imposes tax on 1) Agricultural income tax on large holding tax 2) Surcharge of cash crops 3) Profession tax 4) Tax on urban property New in 1950

5) Sales tax on motor spirit 6) Motor vehicle tax 7) Tax on passengers and goods, entertainment Industrial Finance Sources of finance for small and medium scale industries Both medium and small scale industries require capital for plant and machinery, production and final disposal. The capital varies in rural areas they have to borrow from money lenders or land owners and pay high interest rate. In urban areas, capital is better mobilized. The banks charge rate of interest often ranging between 24 to 36% and not be able to raise necessary capital. a) Loans by Commercial Banks For long time CBs did not bother small and medium scale industries. SBI with RBI took the initiative of setting up a pilot scheme for the provision of credit for small scale industries. The schemes was extended to all branches of SBI. Others CBs were slow in lending by March 1966 they had made advances amount to Rs. 90 crores to small units with nationalization more advance to S & M industries. b) Credit Guarantee Scheme for S & M I Came into force in July 1980. this is a important phase, the objective of the scheme was to provide a measure of protection to specified banks irrespective of their loans to small borrowers in the priority sectors of S & MI. the administration was with RBI, but was transferred to the Deposit Insurance & Credit Guarantee Co-op (DICGC). This operates 5 schemes 4 for small borrowers and one for S & MI. The advances to small borrowers is Rs. 25,600 crores. 515 Credit institute are participating in the 5 th scheme. c) National Small Industrial Co-op. (NSIC) Was set up in February 1955, for the purpose of assisting, financing, protecting and promoting the S / I in India.

Functions are 1. To secure govt. order for output of SI unit. 2. To provide financial, technical and other assistance to fulfil orders. 3. To secure coordination between large and small scale industries to enable small scale. In order to manufacture ancillaries and component parts required by the large-scale industries. 4. To underwrite and guarantee loans from banks and other credit institute. It also introduced hire purchase of machineries on easy payments. It conducts surveys and secures contracts from central government. SIDBI Set up by Govt. of India under a Special Act of the Parliament in April 1990 as wholly owned subsidiary of SIDBI. It has taken over the outstanding portfolio of IDBI relating to the small scale sector worth over Rs. 4,000 crores. Authorised capital of SIDBI is Rs. 250 crores which can be increased to Rs. 1,000 crores. Role: 1. Principal interest for SBI 2. Coordinate functions of other banks and financial institutions 3. Administer small industries for fund and national equity fund. Functions: 1. Refinances loans and advance extended by primary lending institute and provide resources support system. 2. Rediscount on discounts bills arising from sale of machinery. 3. Grants direct assistance as well as refinance loans extended by primary lending institute for financing export of products manufactured by last for industrial concerns in SSI. 4. Extends financial support to state small industries development corporation for providing scarce raw materials to marketing the end products of industrial units in the SSI.

5. Provided financial support to NSIC for providing leasing, hire purchase and marketing support to IU. SIDBI was set up to ensure larges flow of financial assistance to SSI. Technical upgradation and modernization of existing units, expanding channel for marketing. Mission: 1. Stimulate the promotion of new industries 2. Assist the expansion and modernization 3. Furnish technical and managerial aid