White Paper on Indian States (1950)/Part 9/Income-tax
Income-tax
193. The Committee's recommendations concerning the introduction of Income-tax in 1950-51 in Madhya Bharat, Rajasthan and Vindhya Pradesh at the rates now in force in Saurashtra, and the gradual raising of all State rates to the Indian level over a period of two or six years depending upon their present level of rates have been accepted by all States. In the case of PEPSU and Travancore-Cochin it was further agreed that full Indian rates may be introduced from 1950-51 itself.
As regards division of Income-tax it has been agreed that no State could participate in the all-India "Pool" until two years after the full level of Indian taxation had been reached; meanwhile, there would have to be some ad hoc arrangement for each State e.g. that each State should get 50 per cent. of the divisible Income-tax collected within such State.
In the case of Mysore, Hyderabad, and Travancore-Cochin whose last financial years ended on 30th June, 30th September and 16th August 1949, respectively, special agreed arrangements have been concluded enabling them to get the due proportion of their Income-tax revenue in respect of the broken period upto 1st April 1950 when federal financial integration would become effective. A slightly different modification had to be made in the case of Saurashtra where, though the financial year ends on 31st March, income-tax was first introduced only in 1949-50.