Charter Act of 1813 – UPSC

The Charter Act of 1813, also known as the East Indian Company Act 1813, was passed by the British Parliament to renew the charter issued to the British East India Company and continue the Company’s rule in India for a further 20 years.


Earlier, the Charter Act of 1793 extended the trade monopoly of East India Company in India for twenty years, which ended in 1813.

However, the rise of Napoleon Bonaparte had brought hard days to the British traders and merchants of England. Napoleon Bonaparte put forth the Berlin decree of 1806 and the Milan decree of 1807, which prohibited the import of British goods in European countries allied with or dependent upon France. All of this installed the so-called Continental System in Europe. Thus, the British traders and merchants fell into hardship and demanded entry into the ports of Asia, which were under the monopoly of the British East India Company.

Moreover, the Policy of Laissez-faire by Adam Smith had become very popular in those days. It was a free trade policy in which the government interference into the economic affairs of individuals or society was minimum. The support of this free trade policy believed that ending the trade monopoly of East India Company in India would lead to the growth of British Commerce & Industry.

Due to the Continental system in Europe and Laissez-faire policy, the British merchants insisted on bringing an end to the Company’s monopoly over trade in India. However, the East India Company objected to this. The 1813 Charter Act sought to redress all these grievances. Finally, the British traders and merchants were allowed to trade in India under a strict licensing system under the Charter Act of 1813.

Provisions of the Charter Act of 1813

  • The Charter Act of 1813 ended the East India Company’s monopoly over trade in India. But, the Company still retained the monopoly over trade with China and trade in tea. Thus, the Trade with India was thrown open to all British subjects.
  • The Act expressely asserted the sovereignty of the British crown over the British Possessions in India. Thus, the constitutional position of the British territories in India was defined explicitly for the first time.
  • The Company was to retain the possession of British territories and the revenue for further 20 years, without prejudice to the sovereignty of the British Crown.
  • The Charter Act 1813 regulated the Company’s territorial revenue and commercial profits. The Company was asked to keep separate accounts regarding the territorial revenue and commercial transactions.
  • The East India Company’s dividend was fixed at 10.5%. Therefore, the Company’s stakeholders were given a 10.5% dividend on Indian revenue.
  • The Act authorized the Local Governments in India to impose taxes on persons subject to the jurisdiction of the Supreme Court. They could also punish those who did not pay taxes.
  • The powers of the Board of Control were defined and enlarged considerably.
  • The Act strengthened the power of the Provincial Governments and Courts in India over European British Subjects.
  • The Act provided a financial grant for the revival, promotion, and encouragement of literature, learning, and science among the Indian masses.
  • The Charter Act of 1813, for the first time, made a provision for the Company to set aside one lakh rupees every year to invest in the education of Indians.
  • The Charter Act of 1813 granted permission to the missionaries for the free propagation of Christianity in India.
    • Before the 1813 legislation, the East India Company and the British Parliament had refused to countenance missionary activity in India in support of a policy of religious neutrality and on the basis that if India were exposed to Christianity, they would have posed a threat to British commercial ventures.
    • After the 1813 Charter Act, the missionaries were successful in getting the appointment of a Bishop for British India with his headquarters at Calcutta in provisions of the Act.

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