Tax System in Ancient India

Detailed information about ancient Indian tax system is available in texts such as Kautiliya Arthashastra, Manusmrti, Sukraniti and to some extent in Dharmasutras.

It encompasses topics like

• Nature of the tax
• Welfare of the taxpayer
• Amount of tax charged on various products
• Tax on agriculture
• Other taxes
• Exemptions given and other related topics

This article attempts to explain the tax system as enumerated in the Dharmasutras, Kautiliya Arthashastra, Manusmriti and Shukraniti in relevance to the current times.

Introduction

Tax was also known as shulka (duty?), that is the king's share received from the buyer and the seller. The sources of tax were market streets, boundary areas of market, etc. (Shukraniti 4.2.105 ?).

The terms of Taxation

Tax on Profit and not on Capital

Tax should be charged after determining the profits of the businessman (Shukraniti 4.2.108 ?). In any case tax should not be charged on capital (Shukraniti 4.2.107 ?).

The king should realize from peasants (Shukraniti 4.2.116 ?), etc. after noticing the amount of profits and decide whether to take 1/3, 1/5, 1/7, 1/10 amount as tax. Before charging tax, expenses incurred on a product should be determined.

The king should not realize duties from the seller, when he receives less than or just equal to the cost. The king should realize from the minerals after the expenses have been considered (i.e after payment of extraction, production, etc. expenses)(Shukraniti 4.2.115 ?).

In case of newly cultivated land, digging of canals, wells, etc. tax should not be demanded from people until they receive twice the expenditure (Shukraniti 4.2.120 ?)

The traders should be made to pay the duties after due investigation of the details of buying and selling, the journey involved (transportation cost) and the measure of safety (preservation cost).

क्रयविक्रयं अध्वानं भक्तं च सपरिव्ययम् । योगक्षेमं च संप्रेक्ष्य वणिजो दापयेत्करान् । । ७.१२७ । ।

The tax charged by the king should not be more than once. Tax should not be collected by fraud.

(Shukraniti - 4.2.106 ?, Kautilîya Arthashastra - adhyaya 92 ?).

Applying the principle to current situation, it can be said that, tax imposed once on a commodity or the income of a person should not be imposed again on the same.

Welfare of the tax payer

Due importance to the welfare of taxpayer should be given. The amount of tax should not be such that it will destroy the taxpayer completely. Tax should be realized in a fashion of a gardener and not as a coal merchant.(Shukraniti - 4.3.110 ?). As a gardener collects the flowers and fruits after having duly nourished the trees with care (Shukraniti 2.173), similar treatment should be given to the taxpayer. In this context 'Manusmrti' conveys that, as a leech, a calf and a black bee eat their principle to current situation it can be said food gently so little by little the king should draw from his kingdom the annual taxes (Manusmrti 7.128). Tax should be taken in such a way that the king (government) and the businessman both may receive their award (Manusmrti 7.129).

यथा फलेन युज्येत राजा कर्ता च कर्मणाम् । तथावेक्ष्य नृपो राष्ट्रे कल्पयेत्सततं करान् । । ७.१२८[१२९ं] । । यथाल्पाल्पं अदन्त्याद्यं वार्योकोवत्सषट्पदाः । तथाल्पाल्पो ग्रहीतव्यो राष्ट्राद्राज्ञाब्दिकः करः । । ७.१२९[१३०ं] । ।

Tax policy of the government should not affect the functioning of businessman and also it should be in such a way that there would be an increase in government treasury. If the tax is collected by injustice then the king immediately gets ruined along with his relatives (Yajnavalkya Smrti 1.3.340).

अन्यायेन नृपो राष्ट्रात्स्वकोशं योऽभिवर्धयेत् । सोऽचिराद्विगतश्रीको नाशं एति सबान्धवः । । १.३४० । ।

The collection of tax used for wife and children as well as for the enjoyment of oneself leads to hell and unhappiness (Shukraniti 4.2.6). It means that the amount of tax should be utilized by government for eradicating the problems of subjects and not for providing more and more facilities to its ministers, etc.

Tax Compulsory

Tax payment should not be made at the desire of taxpayer, but it should be made compulsory. The king may compel the other people (besides those who are exempted) to pay something called 'Tax' during every year (Manusmrti 7.137).

यत्किंचिदपि वर्षस्य दापयेत्करसंज्ञितम् । व्यवहारेण जीवन्तं राजा राष्ट्रे पृथग्जनम् । । ७.१३७[१३८ं] । ।

The king should promptly realize the duties, etc. without any delay (Shukraniti 4.2.121).

Increment in tax

In certain situations or in case of emergency tax can be increased. But in normal situation increment in tax should not be made. When the army is maintained to destroy the enemy the king should receive special duties (Shukraniti 4.2.9/10). To apply the principle to current situation it can be said that the government can increase taxes to undertake public welfare projects.

When the treasury is below danger level then in that case king may request his subjects, living in small or large villages, which do not depend fully on rainwater, to give 1/3 or 1/4 of the yield and according to the ability from small villages (Arthashastra Adhyaya 92).

जन-पदं महान्तं अल्प-प्रमाणं वाअदेव-मातृकं प्रभूत-धान्यं धान्यस्यांशं तृतीयं चतुर्थं वा याचेत । यथा-सारं मध्यं अवरं वा ।। ०५.२.०२ ।।

Taxes on various products

• King should take 20th or 16th part (excluding cost price) from the seller or 32nd part of the value of product. From the buyer also 32nd part can be taken as a tax (Shukraniti 4.2.106 ?).
• In case of minerals king should realize at following rates 1/2 part of gold, 1/4 part of copper, 1/3 of silver, 1/2 of gems, 1/6 of zinc & iron (Shukraniti 4.2.115 ?)
• 1/6th part is to be taken of trees, meat, honey, clarified butter, perfumes, medicinal herbs, poisons, flowers, roots, vegetables, grass, earthen vessels and of all things made up of stone (Manusmrti 7.131-132).

आददीताथ षड्भागं द्रुमांसमधुसर्पिषाम् । गन्धौषधिरसानां च पुष्पमूलफलस्य च । । ७.१३१[१३२ं] । । पत्रशाकतृणानां च चर्मणां वैदलस्य च । मृन्मयानां च भाण्डानां सर्वस्याश्ममयस्य च । । ७.१३२[१३३ं] । ।

From the above information it can be concluded that high tax was charged on precious metals like gold, silver, etc. and low tax was charged on less expensive, but widely usable metals, products. Detailed information regarding the rates of tax that is to be charged on various products is given in Kautiliya Arthasãstra. (Kautiliya Arthashastra, Adhyaya 92)

• They (the king's employees) may demand of cultivators one-fourth of their grain, and one-sixth of forest produce (vanya) and of such commodities as cotton, wax, fabrics, barks of trees, hemp, wool, silk, medicines, sandal, flowers, fruits, vegetables, firewood, bamboos, flesh, and dried flesh.
• They may also take one-half of all ivory and skins of animals, and punish with the first amercement those who trade in any article without obtaining a license from the king. So much for demands on cultivators.

चतुर्थं अंशं धान्यानां षष्ठं वन्यानां तूल-लाक्षा-क्षौम-वल्क-कार्पास-रौम-कौशेय-कौषध-गन्ध-पुष्प-फल-शाक-पण्यानां काष्ठ-वेणु-मांस-वल्लूराणां च गृह्णीयुः । दन्त-अजिनस्यार्धं ।। ०५.२.१४ ।। तदनिसृष्टं विक्रीणानस्य पूर्वः साहस-दण्डः ।। ०५.२.१५ ।। इति कर्षकेषु प्रणयः ।। ०५.२.१६ ।।

• Merchants dealing in gold, silver, diamonds, precious stones, pearls, coral, horses, and elephants shall pay 50 karas.

सुवर्ण-रजत-वज्र-मणि-मुक्ता-प्रवाल-अश्व-हस्ति-पण्याः पञ्चाशत्-कराः ।। ०५.२.१७ ।।

• Those that trade in cotton threads, clothes, copper, brass, bronze, sandal, medicines, and liquor shall pay 40 karas.

सूत्र-वस्त्र-ताम्र-वृत्त-कंस-गन्ध-भैषज्य-शीधु-पण्याश्चत्वारिंशत्-कराः ।। ०५.२.१८ ।।

• Those that trade in grains, liquids, metals (loha), and deal with carts shall pay 30 karas.

धान्य-रस-लोह-पण्याः शकट-व्यवहारिणश्च त्रिंशत्-कराः ।। ०५.२.१९ ।।

• Those that carry on their trade in glass (kâcha); and also artisans of fine workmanship shall pay 20 karas.

काच-व्यवहारिणो महा-कारवश्च विंशति-कराः ।। ०५.२.२० ।।

• Articles of inferior workmanship, as well as those who keep prostitutes, shall pay 10 karas.

क्षुद्र-कारवो बन्धकी-पोषकाश्च दश-कराः ।। ०५.२.२१ ।।

• Those that trade in firewood, bamboos, stones, earthen-pots, cooked rice, and vegetables shall pay 5 karas.

काष्ठ-वेणु-पाषाण-मृद्-भाण्ड-पक्व-अन्न-हरित-पण्याः पञ्च-कराः ।। ०५.२.२२ ।।

• Dramatists and prostitutes shall pay half of their wages.

कुशीलवा रूप-आजीवाश्च वेतन-अर्धं दद्युः ।। ०५.२.२३ ।।

• Persons rearing cocks and pigs shall surrender to the Government half of their stock of animals. Those that rear inferior animals shall give one-sixth. Those that keep cows, buffaloes, mules, asses, and camels shall give one-tenth (of their live-stock).

कुक्कुट-सूकरं अर्धं दद्यात् । क्षुद्र-पशवः षड्-भागम् । गो-महिष-अश्वतर-खर-उष्ट्राश्च दश-भागं ।। ०५.२.२७ ।।

If excess tax is received, then the provision is that some part should be returned to the tax payer. (Shukraniti 4.2.114 ?)

Those who give much tax by themselves, should be suitably honoured, so that they may be motivated. (Kautilya Arthashastra Adhyaya 92)

Those who, of their own accord or with the intention of doing good, offer their wealth to the king shall be honoured with a rank in the court, an umbrella, or a turban or some ornaments in return for their gold.

सारतो वा हिरण्यं आढ्यान्याचेत । यथा-उपकारं वा । स्व-वशा वा यदुपहरेयुः ।। ०५.२.३५ ।। स्थानच्-छत्र-वेष्टन-विभूषाश्चएषां हिरण्येन प्रयच्छेत् ।। ०५.२.३६ ।।

• The artisans and workers who subsist by bodily labour should work one day per month for the king. (Manusmrti 7.138)

कारुकाञ् शिल्पिनश्चैव शूद्रांस्चात्मोपजीविनः । एकैकं कारयेत्कर्म मासि मासि महीपतिः । । ७.१३८[१३९ं] । ।

In case of increase in population of animals (such as goats, sheeps, cows, etc.), l/8th part of the increased portion can be taken as a tax. (Shukraniti 4.2.118 ?)

In this way there will be a equitable distribution of animal stock. Those who are in need of these type of animals can be provided with the animals taken in the form of tax. l/32nd portion can be taken as tax from the usurers. (Shukraniti 4.2.126 ?)

Tax on Agriculture

Agricultural field was not exempted from tax. Usually in many texts it is mentioned that l/6th part of grains (agricultural product) should be taken as tax. Regarding this, Shukraniti conveys that the king should ascertain the quantity of tax from the land. The land should be divided as high capacity and low capacity yield land and accordingly should charge the tax (Shukraniti 4.2.108 ?).

In short, it can be said that, according to the nature of land the amount of tax was decided.

Other Taxes

Other taxes such as octroi, etc. were also collected. Regarding this, Kautiliya Arthashastra informs about the octroi to be collected from different products (Kautiliya Arthashastra Adhyaya 43).

बाह्यं आभ्यन्तरं चऽतिथ्यं ।। ०२.२२.०१ ।। निष्क्राम्यं प्रवेश्यं च शुल्कं ।। ०२.२२.०२ ।। प्रवेश्यानां मूल्य-पञ्च-भागः ।। ०२.२२.०३ ।।

पुष्प-फल-शाक-मूल-कन्द-वाल्लिक्य-बीज-शुष्क-मत्स्य-मांसानां षड्-भागं गृह्णीयात् ।। ०२.२२.०४ ।।

शङ्ख-वज्र-मणि-मुक्ता-प्रवाल-हाराणां तज्-जात-पुरुषैः कारयेत्कृत-कर्म-प्रमाण-काल-वेतन-फल-निष्पत्तिभिः ।। ०२.२२.०५ ।।

क्षौम-दुकूल-क्रिमि-तान-कङ्कट-हरि-ताल-मनः-शिला-अञ्जन-हिङ्गुलुक-लोह-वर्ण-धातूनां चन्दन-अगुरु-कटुक-किण्व-अवराणां चर्म-दन्त-आस्तरण-प्रावरण-क्रिमि-जातानां आज-एडकस्य च दश-भागः पञ्च-दश-भागो वा ।। ०२.२२.०६ ।।

वस्त्र-चतुष्पद-द्विपद-सूत्र-कार्पास-गन्ध-भैषज्य-काष्ठ-वेणु-वल्कल-चर्म-मृद्भ-अण्डानां धान्य-स्नेह-क्षार-लवण-मद्य-पक्वान्नादीनां च विंशति-भागः पञ्च-विंशति-भागो वा ।। ०२.२२.०७ ।। द्वारादेयं शुल्कं पञ्च-भागः आनुग्राहिकं वा यथा-देश-उपकारं स्थापय्तेत् ।। ०२.२२.०८ ।। जाति-भूमिषु च पण्यानां विक्रयः ।। ०२.२२.०९ ।।

खनिभ्यो धातु-पण्यादाने षट्-छतं अत्ययः ।। ०२.२२.१० ।। पुष्प-फल-वाटेभ्यः पुष्प-फल-आदाने चतुष्-पञ्चाशत्-पणो दण्डः ।। ०२.२२.११ ।।

षण्डेभ्यः शाक-मूल-कन्द-आदाने पाद-ऊनं द्वि-पञ्चाशत्-पणो दण्डः ।। ०२.२२.१२ ।। क्षेत्रेभ्यः सर्व-सस्य-आदाने त्रि-पञ्चाशत्-पणः ।। ०२.२२.१३ ।।

पणोअध्यर्ध-पणश्च सीता-अत्ययः ।। ०२.२२.१४ ।। अतो नव-पुराणां देश-जाति-चरित्रतः । ।। ०२.२२.१५अ ब ।।

पण्यानां स्थापयेच्शुक्लं अत्ययं चापकारतः ।। ०२.२२.१५च्द् ।।

Meaning:

Merchandise, external (bahyam ie. arriving from country parts), internal (abhyantaram ie. manufactured inside forts), or foreign (atithyam ie. imported from foreign countries) shall all be liable to the payment of toll alike when exported (nishkramya) and imported (praveshyam).

Imported commodities shall pay 1/5th of their value as toll.

Of flowers, fruits, vegetables (shaka), roots (mula), bulbous roots (kanda), pallikya (?), seeds, dried fish and dried meat, the suprintendent shall receive 1/6th as toll.

As regards, conch shells, diamonds, precious stones, pearls, corals and necklaces, experts acquainted with the time, cost, and finish of the production of such articles shall fix the amount of toll.

Of fibrous garments (kshauma), cotton clothes (dukula), silk (krimitana), mail armour (kankata), sulphuret of arsenic (haritala), red arsenic (manassila), vermilion (hingulaka), metals (loha), and colouring ingredients (varnadhatu); of sandal, brown sandal (agaru), pungents (katuka), ferments (kinva) dress (avarana), and the like; of wine, ivory, skins, raw materials used in making fibrous or cotton garments, carpets, curtains (pravarana), and products yielded by worms (krimijata); and of wool and other products yielded by goats and sheep, he shall receive 1/10th or 1/15th as toll.

Of clothes (vastra), quadrupeds, bipeds, threads, cotton, scents, medicines, wood, bamboo, fibres (valkala), skins and clay pots; of grains, oils, sugar (kshara), salt, liquor (madya), cooked rice and the like, he shall receive 1/20th or 1/25th as toll.

Gate dues (dvaradeya) shall be 1/5th of the toll dues; this tax may be remitted if circumstances necessitate such favour. Commodities shall never be sold where they are grown or manufactured.

When minerals and other commodities are purchased from mines, a fine of 600 Panas shall be imposed.

When flowers or fruits are purchased from flower or fruit gardens, a fine of 54 Panas shall be imposed.

When vegetables, roots, bulbous roots are purchased from vegetable gardens, a fine of 51 3/4th Panas shall be imposed.

Whenany kind of grass or grain is purchased from field, a fine of 53 Panas shall be imposed.

(Permanent) fines of 1 Pana and 1 1/2 Panas shall be levied on agricultural produce (sitatyayah).

(Commentary: As contrasted with the above fines which are occassional, the following fines are permanently levied on the sale of agricultural produce, irrespective of any offence committed thereof. One Pana is to be imposed on the purchaser and one and half Panas on the seller.)

Hence in accordance with the customs of countries or of communities, the rate of toll shall be fixed on commodities, either older new; and fines shall be fixed in proportion to the gravity of ofences.

Vishnusmrti

In case of imported products l/5th part should be taken as octroi and in case of domestic products 1/10 part should be taken

(svadesapanyãcca šulkāmšam dašamādadyāt' paradesapanyãcca vimšatitamam ļ - Visņusmrti 3.29/30).

Baudhayanadharma sutra mentions about 'sāmudra sulka' (custom duty). In case of products imported from foreign land then sāmudra sulka should be imposed

(sāmudra šulkah ļ varam rüpamudhrtya dasapaņam šatam ' - Baudhäyanadharmasütra 1.10.13/14).

The king should take expensive, precious products as tax and he can charge 10% on remaining goods. Shukraniti mentions about land tax that should be taken from shopkeepers. For the maintenance and repair of the streets tax should be charged from those who use the streets (Šukranīti - 4.3.12).

• Exemptions