L2A
Achieving Aspirations
WINDFALL TAX
Why in news?
Recently, The Government has reduced the windfall profit tax levied on domestically-produced crude oil as well as on the export of diesel and Aviation Turbine Fuel (ATF), in line with softening international oil prices.
About windfall tax:
- A higher tax imposed by the government on specific industries when they experience unexpected and above-average profits is known as a Windfall Tax.
- The term "Windfall" describes a sudden and significant increase in profits. However, the word "Tax" implies an imposition placed on this sharp increase in income.
- When the government notices a sudden increase in an industry's revenue, they impose this tax. However, these revenues cannot be linked to anything the company actively pursued, such as its business strategy or expansion.
- Consequently, a Windfall Tax is imposed on an industry's profits when it experiences a sharp increase in revenue due to unrelated external events.
- Business Companies and Industrial Houses that have experienced significant increases in profits, typically due to circumstances like war, commodity shortages, and other situations and events that raise prices, may be subject to windfall taxes.
- Windfalls, such as those from inheritances or lottery winnings, may also be taxed to Individuals.