There are multiple reasons for the complicated taxation provisions in India. I have tried to list all the reasons for the same.
Diversified population: First things first. India is a country with humongous population. Not just this, there is a lot of diversity in the population as well. Every year the finance minister presents the budget and people are keen to know what exactly is there in the budget for them. A salaried class, an entrepreneur, a start up guy, a farmer, a senior citizen, everyone concerned will ask-’what is in this budget for us?’ Every year the government tries to please some category by either allowing some kind of exemptions or rebate or deductions in tax and the tax provisions hence change every year. This year, the government reduced the taxation rate of 10% on income above 2.5 lakh and below 5 lakh to 5%, thereby lowering the tax burden on middle class individuals a bit. This makes learning and understanding taxes a very difficult and complicated task.
Pet schemes of government: The tax provisions are sadly extremely politicized in India. Every government will try to promote their pet scheme by amending the taxation provisions. Good or bad is a very different question, almost every government has tried to promote their ideas or their schemes using taxation as a tool. Taxation laws have been changed a lot of times to make the schemes run or to promote the people. Say for that matter:
Swachh Bharat Mission, National Mission for Clean Ganga are the pet schemes of BJP government which came to power in the year 2014. Soon after that it amended section 80G of the income tax act in 2015 budget to provide that donations to swachh bharat kosh and clean ganga fund will allow the assessee to claim 100% deduction.
The BJP government also levied Swachh Bharat cess and Krishi Kalyan cess on the services before it merged all the indirect taxes into GST.[1]
The BJP government is a big fan of yoga and the first international yoga day was also started in 2015 in their tenure. Soon after that the BJP government amended the tax laws to consider Yoga as charitable activity allowing the exemptions u/s 11 and 12 of the income tax act.[2]
The BJP government had always had a soft corner for Atal Bihari Vajpayee. It dedicated a scheme under the Atal Pension Yojana and changed few sections of income tax act.[3]
The congress government during its rule had umpteen schemes named after the entire ‘Gandhi’ family. The recent one during their tenure was the Rajiv Gandhi Equity Saving Scheme announced in 2012–13 budget u/s 80CCG of the income tax act, soon before its exit. [4]
Removing the loopholes: Law is all about the interpretation of the words. People always try to interpret them the way they can be benefited. This, many a times had lead the government to amend the tax laws so that there won’t be any loss of revenue to the government owing to the loopholes in the law.
Reducing the harship: Many a times it also happens that the government realizes that few things need to be changed to avoid the hardship and complications. Hence, the taxation laws are again amended. Take for the example of the recent GST council meet, where the government changed few provisions under GST. Mind you, they just introduced GST by merging all the indirect laws and they are again changing it!
(Google image)
To put it in simple words, the only constant with the taxation provisions in India is that it is always changing. Every year it is going to change. The Chartered Accountants like us need to keep the track of every goddamn thing that is amended and have to deal with the ever so complicated taxation laws!