Ala -ud -din Khilji implemented a number of revenue and taxation measures which aimed at establishing an authoritative and despotic state. In order to manifest his desire to extend his empire, it was necessary to increase the income of the state. Other factors were also responsible for bringing about a change in the existing financial and revenue structure of the state.
Ala -ud -din Khilji`s position was threatened by the revolts of the Hindus while the Mongols were posing danger to his empire. Thus a requirement of a well equipped large army was necessary. There are also other reasons which determined the financial policy, for instance, the class which worked as middleman between the state and the peasants enjoyed best advantages. This class had increased its landed property without the consent of the State and, while it collected maximum revenue from the peasants, it paid the minimum to the state. Thus this class enjoyed best advantages at the cost of the state. By implementing various financial policy Ala -ud -din wanted to break up their power and influences on people.
Ala -ud -din Khilji ordered confiscation of all those lands which were given to the people by previous rulers as milk (state srant), inam (state gift), waqf (charitable endowment) and pension in return of state service. He confiscated lands of those people who were not serving the state in any form and again redistributed it among those who were doing helpful service to the state. A complete record was maintained regarding who was assigned how much land and of what quality. This measure of Ala-ud -din Khilji increased the Khalisa-land (state land), left the possession of land in the hands of competent and useful persons and diminished authority of the old nobility.
One of the revenue measures of Ala-ud-din attacked the privileged position of hereditary revenue officers like Khuts, Chaudhris and Muqaddams who were all Hindus. It was alleged that they collected maximum revenue from the peasants but appropriated to themselves as much of it as they could. They escaped payment of taxes like Khiraj, Jizya, Ghari and Charai. Therefore, they had become rich and affluent. Ala-ud-din abolished their privileges and snatched away their right to collect revenues. They were asked to pay revenue and all other taxes and thus, there remained no distinction between the Khuts (zamindars) and the Balahars (ordinary peasants). By this policy Ala-ud-din broke up the power of the Hindus to rise in revolt.
Ala-ud-din raised the revenue demand to one-half of the gross produce. The land revenue was to be assessed by the technique of measurement on the basis of standard yields. Ala-ud-din was the first Muslim ruler who introduced this system which certainly marked a progress upon the customary sharing system. The Sultan preferred to collect the revenue in kind instead of cash. Ala-ud-din also imposed two new taxes. The one was grazing tax on all milch cattle and the other was the house-tax. Taxes like jizya and irrigation tax and import and export duties remained as usual.
The system of Ala-ud-din imposed heavy burden on the peasantry. The peasants had to pay seventy five percent of their income to the state as taxes. While Muslim merchants paid only five percent of the value of their merchandise as tax, Hindu merchants were asked to pay ten percent. This revenue system of Ala-ud-din could not be implemented universally within the entire imperial territory. The collection of revenue by state officers after measurement of land was done only in Delhi and its nearby territories. This system was not introduced in lower Doab, Awadh, Gorakhpt, Bihar, Bengal, Malwa, West Punjab, Gujarat and Sindh.
Ala-ud-din established a new department known as Diwani -i- Mustakhraj to look after his revenue administration. He also engaged a large number of junior and senior officers for the same purpose. He raised the salaries of revenue officers so that they might become free from temptation of bribery. Though, it was not possible to root out corruption and dishonesty from the revenue department, yet Ala-ud-din succeeded in bringing about fair improvement in it by terrorising both his officers and the subjects by his severe punishments given to them in case of non-fulfillment of their responsibility.
Primary objectives of Ala-ud-din were to increase the income of the state and root out possibilities of revolts. By implementing the revenue policy, he succeeded in fulfilling his objectives.