Question

What are the tax reforms taken under the new economic policy of 1991?

Answer 1

The tax reforms under the new economic policy of 1991 aimed to modernize the Indian economy and promote economic growth. These reforms included a reduction of tax rates, introduction of the Minimum Alternate Tax (MAT), abolition of the wealth tax, and simplification of tax administration.

Step-by-step explanation:

The tax reforms taken under the new economic policy of 1991 were part of the economic liberalization measures introduced in India. These reforms aimed to modernize the Indian economy and promote economic growth. The tax reforms included:

1. Reduction of tax rates: The tax rates were reduced to encourage investment and entrepreneurial activity. The maximum marginal tax rate for individuals was reduced from 56% to 40%.
2. Introduction of the Minimum Alternate Tax (MAT): MAT was introduced to ensure that companies with substantial profits but low tax liability paid a minimum amount of tax.
3. Abolition of the wealth tax: The wealth tax, which was levied on individuals and companies based on their net wealth, was abolished.
4. Simplification of tax administration: The tax administration processes were simplified to make it easier for individuals and businesses to comply with tax regulations.