Read the following statements - Assertion (A) and Reason (R)carefully and choose the correct alternative given below:
Assertion (A) :In the pre 1991 period ,income tax rate were very high which led to large scale tax evasion and generation of black money.
Reason (R ):In post 1991 period, custom duties have been reduced considerably.
Answer & explanation
Correct answer: option 2
Since 1991, there has been a continuous reduction in the taxes on individual incomes as it was felt that high rates of income tax were an important reason for tax evasion. It is now widely accepted that moderate rates of income tax encourage savings and voluntary disclosure of income.
The custom duties were reduced considerably in the post reform period so that globalisation could be encouraged and trading could be done easily without barriers.