The Pragmatism and Compassion of the Kautilyan Taxation System

The fifth part of this series examines some aspects of the philosophy of Kautilya's Taxation system and his dictum of amassing huge wealth as a source of protection.
The Pragmatism and Compassion of the Kautilyan Taxation System

In this Series

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The Pragmatism and Compassion of the Kautilyan Taxation System
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The Pragmatism and Compassion of the Kautilyan Taxation System


Taxation is another major area where we see Chanakya’s invisible hand throughout the Hindu civilizational history. The second Adhikarana (Chapter) of the Arthasastra, has a rather compassionate and grounded exposition of the Kautilyan taxation system. In verses six through eight, Chanakya mentions how the king should show Anugraha (favour) to farmers by supplying them seed, cattle, and money for farming, and that they should return it in instalments after reaping harvest. The king should also give them tax breaks in such a way that it “swells the treasury eventually.”

We see an exact replica of this policy in the Vijayanagara Empire. In 1379, Harihara II passed the following order: “by this order, the State has exempted from tax this land which has been brought under cultivation. Further, by making provision for irrigation and by digging canals, [this] village has made many improvements. Rice fields and gardens have been irrigated. In order to continue these improvements, the Emperor gave the people lands which are irrigated by this water tax-free for nine years so that the revenue amounts to 20,000 Pagodas.”

The consequence was, as Kautilya had anticipated so long ago, that the royal treasury “swelled.” Agricultural production touched an all-time high and the tax incentive enabled farmers to produce more.

This compassionate side of the Kautilyan taxation system was also informed with his innate understanding of a simple, verifiable truth: preserving culture preserved and improved the economy. However, this cultural impetus was born from the fact that Kautilya was himself a brilliant exponent of Sanatana Dharma. In the realm of taxation, this translated into the exemption of certain Shulkas (tolls):

1. Items taken by a new bride from her parents’ house to her husband’s house.

2. Items carried by anyone for facilitating the delivery of a woman.

3. Items taken for Puja, Yatra, Yagna, Vrata, etc

4. Items taken for ceremonies like Chaula (tonsuring), Namakarana (naming ceremony), Upanayana (Sacred Thread ceremony), Godana (donating cows), etc.

We see the practical application of this exemption-rule throughout the history of Hindu Empires.

Under the Cholas, an entire village would be exempt from tolls if its members went travelled for attending an out-of-town marriage, Yatra, festival etc.

Next, we have a great story where an Antyaja (people known today as Dalits) was returning to his village from a pilgrimage. He was harassed by the toll-keeper of the Araga region (Malnad). The harasser did not relent even after repeated pleading and the poor Antyaja had to cough up money. Eventually, he made an official complaint. In no time, the local chieftain severely punished the toll-keeper by stripping him of his job and levying a huge penalty.

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The Pragmatism and Compassion of the Kautilyan Taxation System

Next, Kautilya also systematized the practice of making grants of entire villages, lands, etc., in some special cases and exempting them from tax. We see his legacy in this area throughout the history of most Hindu Empires. We have definitive inscriptions and grants right from the Gupta period up to the Marathas, and the Wodeyars, which give us detailed records of this practice. In the Wodeyar rule, this was variously known as Parihara, Maanya, Inaam, etc. However, the term Parihara, which was in vogue for several centuries, was used in the sense of compensation, exemption, grant, etc.

The other area of taxation that can be traced back to Kautilya is what is today known as origin of income. In Kautilya’s period and later as well, this meant identifying the place of origin of an item to be taxed. For example, it would be ridiculous to levy wool tax in a desert region. In fact, just by looking at the list of items he taxes by identifying their geographical origin, we are spellbound by his minute knowledge of Bharatavarsha’s geography and production of commercial goods. Thus, it is unsurprising that the Arthasastra became a pan-Indian work and has exerted such an enormous influence in our history.


Now we can briefly trace Kautilya’s lasting influence on the most important organ of any nation: military strength. In Kautilya’s time, military strength was variously known as bala or danda. He divides troops into six major categories:

1. Maula: hereditary warriors, i.e., people with a lineage of military service.

2. Bhrta or Bhrtaka: hired troops

3. Shreni: troops maintained by guilds and business corporations.

4. Mitra: troops of allies

5. Amitra: troops formerly belonging to the enemy

6. Atavika: hunter-warriors

We see this exact division in the very first sloka of a Sixth Century grant given by Dhruvasena I of the Maitraka dynasty of Valabhi (ruling from the Saurashtra region). The verse says how this mighty king acquired his kingdom with the help of Maula-Bhrata-Mitra-Shreni.

From Valabhi, we can travel to Karnataka. Here, we see the Chalukya emperor Someshwara III writing in detail about the division of the military in his encyclopedic classic, Manasollasa. We notice that he is directly inspired by Chanakya when he says that other divisions of troops are always preferable to Atavikas and Amitras who cannot be fully trusted.

Thus, the more we seek, the deeper we dig, the more examples we find of Kautilya’s eternal imprint on Bharatavarsha’s fortunes and destiny.

In passing, we can also look at another important Kautilyan prescription in Chapter Seven of the Arthasastra:

The acquisition of land is better than that of gold and friend, and the acquisition of gold is better than the acquisition of a friend.

On the surface, this sounds heartless but politics and statecraft is not for the faint-hearted. We must remember the fact that Chanakya’s target audience is the King, and not the proverbial common citizen. But even if we set aside this target audience for a while and examine another historical truth, the lasting significance of this dictum becomes clear: such policies were what precisely kept the Maurya Empire flourishing for nearly 250 years. And these policies are exactly what preserved the Vijayanagara Empire amidst such dangerous and bigoted enemies: the Asuric Bahamani sultans who were the permanent source of danger in the North.

We can examine this pragmatic Kautilyan wisdom using the same Vijayanagara example.

Among all great Hindu Empires, Vijayanagara stands tallest in following this Kautilyan dictum in letter and spirit. From its very founding days, the Vijayanagara monarchs made it their state policy to amass enormous amounts of wealth, which itself was a great source of protection and stability. This wealth allowed them to constantly expand their boundaries, it bought them the loyalties of their vassals, and where dirty tricks were called for, the Vijayanagara kings used dirty tricks.

The stability, peace and prosperity that the Vijayanagara Empire enjoyed for about 250 years, was based on the twin foundations of a large and ferocious military and unrivalled economic might. It did not come by following phony Gandhian appeals to the “innate goodness in the heart of the enemy” and other such pious nonsense. In fact, the last de facto ruler, Aliya Rama Raya tried a version of this Gandhian model to his own peril. He adopted the Bahamani princeling as his son, lavished enormous gifts and honours on him only to be repaid by having his head chopped off.

To be continued

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