When new territories join the Indian Union—as happened under the Acquired Territories (Merger) Act, 1960—one of the biggest challenges is ensuring that financial systems, taxation rules, and legal structures align smoothly with the rest of the country. People living in these territories move from one administrative environment (often a foreign colonial system) to another. Ensuring a smooth transition is both a constitutional responsibility and a practical necessity for governance.
Let’s walk through how India handled financial and legal administration in these merged regions, and what it meant for residents during and after the merger.
1️⃣ Transition from Foreign Systems to Indian Frameworks
The acquired territories—like Pondicherry (Puducherry), Dadra & Nagar Haveli, Daman & Diu, Goa and others—were previously governed by French and Portuguese legal, financial, and tax systems. These systems were vastly different from Indian administrative structures.
After merger, the government needed to align:
- Court systems
- Revenue collection
- Police and local administration
- Budgetary processes
- Public audit systems
This transition was done in phases so residents didn’t feel a sudden shock.
2️⃣ Introduction of Indian Taxation and Revenue Systems
A major step in financial integration was the replacement of colonial taxes with Indian frameworks. This included:
✔ Income Tax
People and businesses were brought under the Indian Income Tax Act, though some territories received temporary exemptions to avoid economic disruption.
✔ Customs Duty and Trade Regulations
Coastal enclaves like Daman & Diu and Goa had to transition from Portuguese-era customs controls to the Indian Customs Act.
This affected:
- import/export procedures
- port regulations
- trade compliance
✔ Property and Land Revenue System
Portuguese and French land records often followed totally different standards. India had to:
- re-register properties
- update land records
- integrate revenue offices
This was a massive administrative exercise but essential for legal certainty.
3️⃣ Unified Banking and Monetary Framework
Before integration, some territories used:
- French Francs
- Portuguese Escudos
- Local currency variations
After merger, the Indian Rupee became the sole legal tender.
The Reserve Bank of India (RBI) supervised:
- currency exchange
- establishment of Indian banks
- regulation of cooperative banks already functioning in the territories
This created financial stability and better access to credit, especially for small businesses, fishermen, and farmers.
4️⃣ Application of Indian Legal Codes
One of the most significant changes after the merger was the introduction of Indian laws such as:
- Indian Penal Code (IPC)
- Code of Criminal Procedure (CrPC)
- Indian Evidence Act
- Civil Procedure Code (CPC)
- Indian Contract Act
- Transfer of Property Act
- Registration Act
However, certain local laws were retained temporarily to avoid administrative vacuum. For example, Portuguese Civil Code—especially its unique family laws—continues to apply in Goa even today, making it a special case in Indian legal history.
5️⃣ Establishing Courts and Judicial Hierarchy
Before integration, these territories had foreign judicial systems. India created:
- District and Sessions Courts
- Magistrate Courts
- Revenue Courts
- Consumer and small-causes forums
Existing judges were absorbed after training, or new judicial officers were appointed.
This ensured that people received:
- access to justice
- Indian procedural safeguards
- enforcement of fundamental rights
6️⃣ Budgeting, Public Finance, and Audit
Each merged territory required:
- its own Union Territory budget
- integration into the Consolidated Fund of India
- audit by the Comptroller and Auditor General (CAG)
Funds were allocated for:
- infrastructure development
- legal and administrative reforms
- improving transport and education
- connecting remote enclaves with mainland India
This financial support was crucial because many of these regions were previously neglected under colonial rule.
7️⃣ Employment, Services, and Pay Structure Integration
Government employees working under French or Portuguese systems needed to be:
- absorbed into Indian services
- given options to opt for voluntary retirement
- aligned with Indian pay scales
- provided training in Indian laws and procedures
This was essential for establishing administrative continuity.
8️⃣ Real-Life Case Study: Integration of Tax and Legal Systems in Goa
When Goa was liberated in 1961 and later integrated with India:
- Portuguese commercial laws continued briefly
- Indian excise laws replaced Portuguese excise on liquor and alcohol
- Indian Penal Code replaced Portuguese criminal laws
- Indian taxation was gradually introduced
- Banking was expanded through SBI and other national banks
Residents initially faced confusion, especially traders accustomed to Portuguese tax rates.
To ease the transition, the government ran public awareness programs, multilingual notices, and town-hall meetings explaining:
- how income tax works
- which permits were required
- rights of citizens under Indian Constitution
This helped reduce resistance and built trust among locals.
9️⃣ Benefits for Residents After Financial and Legal Integration
Once fully integrated, residents enjoyed several long-term benefits:
✔ Access to Indian banking & credit systems
This helped small traders and entrepreneurs grow.
✔ Stronger legal protections
Fundamental rights, legal remedies, and judicial accessibility improved drastically.
✔ Better wages & government employment opportunities
Indian pay scales and employee benefits were more favourable than colonial systems.
✔ Increased investments
Tourism, ports, shipping, and allied industries expanded.
✔ Protection of cultural identity
Despite legal integration, India allowed preservation of local customs—like the Portuguese Civil Code in Goa and French language usage in Puducherry.
10️⃣ Impact on Local Governance
Merged territories usually became Union Territories (UTs), meaning:
- administration was directly under the President
- laws were framed by Parliament
- administrators/lieutenant governors supervised governance
This ensured better control and smoother legal transition.
FAQs: Financial & Legal Administration in Merged Territories
Q1. Did Indian laws immediately replace all foreign laws?
Not immediately. Some foreign laws continued temporarily to avoid disruption.
Q2. What happened to property laws in Portuguese territories?
Many elements of the Portuguese Civil Code, especially family and succession laws, are still followed in Goa even today.
Q3. Were residents taxed heavily after integration?
No. Taxation was introduced gradually with several exemptions during the transition period.
Q4. Who handled financial audits in merged territories?
The Comptroller and Auditor General (CAG), just like in other parts of India.
Q5. Did the merger help the local economy?
Yes! The Indian market, investments, banking access, and constitutional protections significantly boosted development.