Firstly, the rate of the tax fixed by the Company was very high. Company had fixed the rates, thinking of the future losses. Since the company gets only a fixed amount, any profit made by the Zamindar will remain with him. These profits would come from increased production and increased prices.
The Company argued that zamindars would make huge profits in the future and so the initial high tax should not prove difficult for them.
Secondly, the Company fixed these high taxes in the 1790s. It was a time of economic depression. The price of agricultural products came down drastically. Naturally the Zamindars could not pay taxes to the government, as they failed to get it from the farmers.
Thirdly, the Zamindars had to give a fixed amount to the Company. Whether the crops were good or bad, the amount had to be paid. There was the strict condition for this payment. If the payment was not received before sunset on the last day for payment, the zamindaris would be auctioned. This way many zamindars lost their zamindaris.
Fourthly, the Permanent Settlement reduced the authority of the Zamindars and controlled their autonomous state. Zamindars had to send their soldiers away. Zamindars were also denied the right to charge ‘customs’. Their ‘kacheris’ (courts) came under the authority of the Collector appointed by the Company. They also lost the power to maintain law and order in their areas. All this adversely affected them and their power to collect taxes from the farmers was reduced.
