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The ryotwari system, instituted in some parts of India, was one of the main systems used to collect revenues from the cultivators of agricultural land. These revenues included undifferentiated land taxes and rents, collected simultaneously. Where the land revenue was imposed directly on the (the individual cultivators who actually worked the land)—the system of assessment was known as ryotwari. Where the land revenue was imposed indirectly—through agreements made with Zamindars—these system of assessment was known as zamindari. In Bombay, Madras, Assam and Burma the Zamindar usually did not have a position as a middleman between the government and the farmer.
An official report by John Stuart Mill in 1857 explained the ryotwari land tenure system as follows. As John Stuart Mill was himself working for the British East India Company, the following quote will see the system from the British perspective:
Under the Ryotwari System every registered holder of land is recognised as its proprietor, and pays direct to Government. He is at liberty to sublet his property, or to transfer it by gift, sale, or mortgage. He cannot be ejected by Government so long as he pays the fixed assessment, and has the option annually of increasing or diminishing his holding, or of entirely abandoning it. In unfavourable seasons remissions of assessment are granted for entire or partial loss of produce. The assessment is fixed in money, and does not vary from year to year, in those cases where water is drawn from a Government source of irrigation to convert dry land into wet, or into two-crop land, when an extra rent is paid to Government for the water so appropriated; nor is any addition made to the assessment for improvements effected at the Ryot's own expense. The Ryot under this system is virtually a Proprietor on a simple and perfect title, and has all the benefits of a perpetual lease without its responsibilities, in as much as he can at any time throw up his lands, but cannot be ejected so long as he pays his dues; he receives assistance in difficult seasons, and is irresponsible for the payment of his neighbours. . . . The Annual Settlements under Ryotwari are often misunderstood, and it is necessary to explain that they are rendered necessary by the right accorded to the Ryot of diminishing or extending his cultivation from year to year. Their object is to determine how much of the assessment due on his holding the Ryot shall pay, and not to reassess the land. In these cases where no change occurs in the Ryots holding a fresh Potta or lease is not issued, and such parties are in no way affected by the Annual Settlement, which they are not required to attend.
The ryotwari system is associated with the name of Sir Thomas Munro, who was appointed Governor of Madras in May 1820. Subsequently, the ryotwari system was extended to the Mumbai area. Munro gradually reduced the rate of taxation from one half to one third of the gross produce, even then an excessive tax. The levy was not based on actual revenues from the produce of the land, but instead on an estimate of the potential of the soil; in some cases more than 50% of the gross revenue was demanded.
In Northern India, Sir Edward Colebrooke and successive Governor-Generals had implored the Court of Directors of the British East India Company, in vain, to redeem the pledge given by the British Government, and to permanently settle the land-tax, so as to make it possible for the people to accumulate wealth and improve their own condition.
Payment of the land tax in cash, rather than in kind, was instituted in the late 18th century when the British East India Company wanted to establish an exclusive monopoly in the market as buyers of Indian goods. Critics asserted that in practice the requirement of cash payments was ruinous to the cultivator, exposing him to the demands of moneylenders as an alternative to the loss of his land and starvation when crops failed. They also asserted that lean years resulted in regional famines, as the cultivators could not accumulate capital or invest in the productive development of their landholdings. then after the revenue to the people
- To collect tax from a land, the British had zamindars bid for the highest tax rates; i.e., zamindars quoted a tax rate that they promised to obtain from a particular land.
- The highest bidder was made the owner of the land from which they collected the taxes.
- The farmers and cultivators who owned the land lost their ownership and became tenants in their own land.
- They were to pay the landlords/zamindars the tax for the land only in the form of cash and not in kind.
- If a zamindar was not able to collect the quoted amount of tax, he lost the ownership.
By comparison, this is the way taxes had been collected by the king:
- The tax could be paid either in cash or in kind.
- Payments in kind were mostly in the form of land which was given to the king.
- The king never made use of those lands, which could be bought back by the farmers after they got back some money.
- The farmer owned his land.
- Tax rates were reduced in case of a famine, bad weather or other serious event.
The differences are these:
- Since the farmer had to pay only in cash under the new system, he could only sell it to a fellow farmer who started using the land for cultivation of a different crop and therefore was not willing to return it.
- The farmer eventually lost some part of his land to someone else and consequently retained a highly awkward remnant of land for cultivation.
- This led to excessive marketing of land, which lost its sentimental grip on the farmer. The land became merely a commodity.
Also because of the political scheme of Subsidiary Alliances, the pressure on agricultural land made things worse. It led to a failure of administrating the blame on the feudatory king of the province; and therefore the British easily could take over the administration.
- John Stuart Mill, Examiner of the India Office, "Return to an Order of the House of Commons (June 9, 1857), showing under what tenures, and subject to what Land Tax, lands are held under the several Presidencies of India. Quoted by Romesh Dutt, The Economic History of India in the Victorian Age. From the Accession of Queen Victoria in 1837 to the Commencement of the Twentieth Century, Vol.II. London, Kegan Paul, Trench Trübner (1904), pp. 93-4. On line. McMaster ISBN 81-85418-01-2
- "Munro and the Ryotwari Settlement in Madras, 1820-27", in R. C. Dutt, The Economic History of India Under Early British Rule. From the Rise of the British Power in 1757 to the Accession of Queen Victoria in 1837. Vol. I. London, Kegan Paul, Trench Trübner (1902) IX, pp. 153-171; 2001 edition by Routledge, ISBN 0-415-24493-5. On line, McMaster
- "Wingate and the Ryotwari Settlement in Bombay, 1827-35", in R. C. Dutt, The Economic History of India Under Early British Rule. From the Rise of the British Power in 1757 to the Accession of Queen Victoria in 1837. Vol. I. London, Kegan Paul, Trench Trübner (1902) IX, pp. 368-383; 2001 edition by Routledge, ISBN 0-415-24493-5. On line, McMaster
- Ibid., p. 369. Bishop Heber to the Right Honourable Charles Williams Wynn, dated Karnatic, March 1826: "Half the gross produce of the soil is demanded by Government, and this, which is nearly the average rate wherever there is not a Permanent Settlement, is sadly too much to leave an adequate provision for the present..." by Amelia (Shipley) Heber, Life of Reginald Heber, D.D., The Lord Bishop of Calcutta by his Widow with Selections, Correspondence, Unpublished Poems, and Private Papers ... (1830) v. II, p. 413.
- Ibid., p. 368.