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Report No. 250

42. Compulsory Deposit Scheme Act, Act 21 of 1963

Category: Financial Laws

Recommendation: Repeal

The Act made it compulsory for all categories of persons, as mentioned in Section 2 of the Act, to make certain deposits. According to Section 2, the Act was meant to be applicable to five different categories of persons viz., persons liable to payment of land revenue; persons liable to payment of tax under the Income-Tax Act, 1961; holders of immovable properties situated in urban areas assessed to tax; employees of the Government and local authorities, and dealers whose annual turnover is Rs. 15,000 or more and who are not liable to payment of income tax under the Income-Tax Act, 1961.

The Act has gradually fallen into disuse because of the discontinuance of various sub-schemes. The sub-schemes which were to be implemented through the State Governments and local authorities concerned were dropped owing to considerable practical difficulties. The scheme relating to employees not taxable to income tax was withdrawn from 23rd September 1963. For the other categories, the Compulsory Deposit (Income Tax Payers) Act, 1974 was enacted (which was also discontinued with effect from 1th April 1985).

The Law Commission of India in its 159th Report on Repeal and Amendment of Laws has documented the Department of Economic Affairs' proposal to repeal this Act. The reason furnished by the Department of Economic Affairs for proposing repeal of this Act was that in future any occasion or necessity for such compulsory deposits will not arise. Hence, the Department proposed repeal of this Act while making provision for disposal of the amounts already in deposit under the respective enactments.

Consequently, the Central Government should repeal this Act. A suitable savings clause should be inserted in the repealing Act. This Act has also been recommended for repeal by the PC Jain Commission Report (Appendix A-1) and the 159th Report of the Law Commission of India.

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