The existing system of public finance and
taxation is highly inequitable and irrational. It will,
therefore, have to be radically recast and overhauled. The
following are a few important points that ought to be
incorporated in the future Constitution of India:
a. National finance shall be suitably
decentralised so as to make local self- government a reality.
At least one-half of the land revenue collected by villages
shall be made over to the respective village panchayats.
b. Details regarding the allotment of the
other half of the land revenue among the district, provincial
and All-India panchayats shall be decided by a competent
commission appointed by the Constituent Assembly.
c. Other revenues necessary for meeting
local expenditure shall be raised by the village panchayats by
means of taxation in the form of fasli chanda (harvest
subscription), private donations, arbitration fees, fines,
grazing charges etc. Taxation in the form of direct manual
labour by the villagers shall be encouraged.
d. State expenditure on public utility
services like health, education and research shall be
e. A graded tax shall be imposed on
agricultural incomes above a specified minimum.
f. Inheritance taxes on a graduated scale
shall be levied on property above a fixed minimum.
g. Income tax shall be a provincial source
h. Salt shall be free as air.
i. Payment of taxes in kind, especially in
the rural areas, shall be favoured.
Redistribution of Resources
The Sovereign Rights Commissions proposed
in Section 4 of the Preamble shall, after hearing various
interest groups and intense study, restructure functions and
resource distribution based on the following principles:
1 A natural resource or a tax should be
managed by the government that can do so most economically
and efficiently and that creates least administrative
2 Resources should be so distributed that
most local governments are self-sustaining and only a few
weak ones need support from higher level governments until
their economy gets stabilised.
Most natural resources such as land, water
systems, forests and minerals should be under local control.
Large water management projects can be under state or national
control depending upon their impact. Interestingly, while
railways should be under national control, airports should be
under local governments! Octroi on highways should be under
national, instead of local control! Such issues will need
The financial year commences in Britain on
April 1, presumably since winter ends and the working spring
season commences. Our rulers introduced the same financial
year in India. We have stuck to it after independence. Most
programmes get disrupted in March, the middle of the working
season, when the financial year ends. Many departments draw
huge amounts to prevent lapse, a serious financial
Indian political thinkers such as
Shukracharya and Chanakya proposed the financial year from
Diwali. Even today, traditional financiers open new books of
account on Diwali.
It will be best to institute the financial
year from the first of October. Agriculture production
depends to a great extent on the status of the monsoon. By
September, the finance minister can have a fairly good idea of
the expected agricultural production and mould the budget
accordingly. The working season will not get broken by the
financial year facilitating efficient public management.