Features of Income Tax in India
Income tax is levied
in India by
virtue of entry No. 82 of list I (Union List) of Seventh Schedule to the
Article 246 of the Constitution of India.
Income tax is charged by the Central
Government on all incomes other than agricultural income. However, the power to
charge income tax on agricultural income has been vested with the State
Government as per entry 46 of list II, i.e., State List.
Income tax is direct tax. It is because
the liability to deposit and
ultimate burden are on same person. The person earning income
is liable to pay income tax out of his own pocket and cannot pass on the burden
of tax to another person.
Income tax is an annual tax because it
is the income of a particular year which is chargeable to tax.
It is a tax on income earned by a
person. The term ‘person’ has been defined under the Income tax Act. It
includes individual, Hindu Undivided Family, Firm, Company, local authority,
Association of person or body of Individual or any other artificial juridical
persons. The persons who are covered under Income tax Act are called
‘assessees’.
It is a tax on income. The Income tax
Act has defined the term income and it includes salary income, house property
income, business/profession income, capital gains and other sources income.
However, there are certain incomes which are specifically exempt from income
tax.
Income earned during a particular
financial year is assessed to tax in the immediately following financial year.
The year of earning income is called ‘Previous Year’ and the year in which
assessment of income is done is called ‘Assessment Year’. The income tax return
of previous year’s income is filed in the relevant assessment year.
Income tax is charged at prescribed
rate(s). The rates of income tax differ for different income and for different
persons. While tax rates for normal incomes are prescribed by the annual
Finance Act, tax rates for certain special incomes have been prescribed under
Income Tax Act itself. For instance, the following tax rates have been
prescribed under Income Tax Act.
a.
Tax on long term capital gain @ 20%
(Section 112).
b.
Tax on short term capital gain on shares
covered under STT @15% (Section 111A).
c.
Tax on lottery income @ 30% (Section
115BB)
Income tax is administered by the
Central Government (Ministry of Finance) with
the help of ‘Income tax department’ with branches throughout the
country. The Central Government has constituted the ‘Central Board of Direct
Taxes’ (CBDT) which exercises overall control over the Income tax department by
issuing guidelines for related matters.
Income Tax is applicable throughout
India including the State of Jammu and Kashmir.
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