India’s taxation landscape has undergone significant changes over the decades, reflecting shifts in economic policies and fiscal strategies. A historical analysis of India’s highest tax rates reveals a sharp contrast between earlier decades and the present, showcasing a gradual move towards a more balanced tax structure.

Tax Rates from 1950 to Present

In 1950-51, the highest tax rate stood at 25%, a relatively modest level compared to subsequent decades. However, the 1960s saw a drastic rise, with the highest rate reaching 88%, marking a period of heavy taxation on high-income individuals.

The upward trend continued into the early 1970s. In 1971-72, the highest rate surged to 93.50%, and between 1972-75, it peaked at 97.75%, one of the highest in India’s history. These extremely high tax rates were a part of socialist economic policies that sought to redistribute wealth but were often criticised for discouraging investment and entrepreneurship.

The 1980s saw a gradual decline, with the highest tax rate falling to 72% in 1980-81 and further to 50% in 1986-87. The 1990s, a decade of economic liberalisation, witnessed a marked reduction in tax burdens. By 1992-93, the highest tax rate had come down to 44.80%, followed by 40% in 1995-96 and 30% in 1997-98.

In the 2019-20 financial year, the highest tax rate stood at 43%, and currently, it is approximately at 39% reflecting a relatively stable tax environment compared to the peaks of the past.

Shift in Taxation Policy

The significant drop in tax rates since the 1980s aligns with India’s economic liberalisation and reforms, aimed at encouraging investment, improving compliance, and widening the tax base. The reduction from the excessive taxation of the 1970s to more moderate levels in the 1990s and beyond was a key factor in driving economic growth.

High tax rates in the past often led to tax evasion and discouraged wealth generation. The rationalisation of rates was designed to improve tax collection efficiency while ensuring that individuals and businesses contributed fairly to the economy.

Conclusion

India’s tax system has changed a lot over the years, from very high rates in the 1970s to a more balanced approach today. The highest tax rate is now 39%, much lower than before.

These changes have been made to ensure people pay taxes fairly while supporting economic growth. As policies continue to evolve, future decisions will shape how taxes impact businesses and individuals in the country.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

The government has extended the Jal Jeevan Mission until 2028, with an increased budgetary outlay to achieve universal tap water coverage in rural India, Union Finance Minister Nirmala Sitharaman announced while presenting the Union Budget 2025.

Progress Under the Mission

The Finance Minister stated that 15 crore households, covering 80% of India’s rural population, have already been provided access to potable tap water connections under the mission. Initially, the target for full coverage was set for 2024, but the extension aims to ensure 100% completion over the next three years.

The mission focuses on improving infrastructure quality and enhancing operations and maintenance through jan bhagidari. To strengthen water service delivery, separate MoUs will be signed with states and union territories for sustainable and citizen-centric implementation.

Objectives of the Jal Jeevan Mission

The mission aims to provide Functional Household Tap Connections (FHTCs) to every rural household and prioritise coverage in drought-prone areas, desert regions, and water-quality-affected zones. Other key objectives include:

• Ensuring tap water access in schools, anganwadis, health centres, and gram panchayat buildings
• Promoting community ownership through voluntary contributions in cash, kind, or labour
• Developing robust institutional frameworks for service delivery and financial sustainability
• Enhancing local capacity building for water infrastructure, treatment, plumbing, and maintenance
• Raising awareness about safe drinking water and water conservation

Key Components of the Mission

The Jal Jeevan Mission provides financial and technical support for the following initiatives:

• Expansion of piped water infrastructure to ensure last-mile connectivity in rural areas
• Development of reliable drinking water sources and augmentation of existing ones
• Installation of bulk water transfer systems, treatment plants, and distribution networks
• Technological solutions for removing contaminants from drinking water
• Greywater management and wastewater treatment
• Capacity-building programmes for communities and local institutions
• Emergency response measures for water supply disruptions due to natural calamities

Conclusion

The extension of the Jal Jeevan Mission until 2028 reflects the government’s commitment to providing safe and reliable tap water to every rural household. With increased budget support and a focus on sustainable water management, the mission aims to improve infrastructure, ensure long-term water availability, and enhance community participation.

As implementation progresses, the initiative is expected to significantly improve public health, rural development, and overall quality of life. By 2028, the goal is to achieve full coverage, ensuring that clean drinking water reaches every household across India.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

The Nifty FMCG Index surged 4% in today’s trade following Finance Minister Nirmala Sitharaman’s announcement of no income tax up to ₹12 lakh in the Union Budget 2025. The tax relief is expected to boost disposable income, driving consumer demand for fast-moving consumer goods.

ITC, Trent, and Godrej Consumer Products Shares Lead Nifty FMCG Rally

At 1 pm, the Nifty FMCG Index was up 4%, marking its biggest one-day gain in 7 months. The rally was led by ITC, Trent, and Godrej Consumer Products, each rising 7%. Other stocks, including Varun Beverages and Hindustan Unilever, recorded gains of up to 4%. The broader consumption sector also benefitted, with auto and retail stocks such as Maruti Suzuki and Kalyan Jewellers seeing strong buying interest.

Nifty FMCG Index’s Reaction to Tax Reforms

The Finance Minister highlighted that the new tax regime aims to simplify the structure while benefiting the middle class. Market participants reacted positively to the announcement, as the increase in disposable income is expected to boost consumer spending.

Nifty FMCG Index Composition and Key Stocks

The Nifty FMCG Index tracks the performance of 15 fast-moving consumer goods companies listed on the National Stock Exchange. It is calculated using the free-float market capitalisation method and is rebalanced semi-annually.

The largest constituents of the index by weightage are:

• ITC Ltd – 30.71%
• Hindustan Unilever Ltd – 20.15%
• Nestlé India Ltd – 7.62%
• Varun Beverages Ltd – 6.61%
• Tata Consumer Products Ltd – 6.13%

Impact of Budget Measures on Consumer Demand

The budget aims to increase disposable income, allowing households to have more funds for spending. This is expected to drive higher demand for consumer goods.

It also introduces a simplified tax structure, reducing complexities in tax filing. Together, these measures are likely to strengthen the overall purchasing power of the economy.

Next Rebalancing of the Nifty FMCG Index

As of 31 January 2025, the Nifty FMCG Index had a price-to-earnings ratio of 45.98, a price-to-book ratio of 1.82, and a dividend yield of 11.23%. The index is scheduled for its next rebalancing in July 2025.

With the tax relief set to enhance consumer demand, market participants might closely monitor FMCG stocks in the coming sessions to assess the impact on sales growth and earnings in the next quarter.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.