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Chapter: 11th Commerce : Direct Taxes

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.

Features of Income Tax in India

 

i. Levied as Per the Constitution

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.

ii. Levied by Central Government

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.

iii. Direct Tax

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.

iv. Annual Tax

Income tax is an annual tax because it is the income of a particular year which is chargeable to tax.

v. Tax on Person

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’.

vi. Tax on Income

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.

vii. Income of ‘Previous Year’ is Assessable in ‘Assessment Year’

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.

viii. Charged at Prescribed Rate(s)

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)

ix. Administered by the Central Government

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.

x. Applicability

Income Tax is applicable throughout India including the State of Jammu and Kashmir.

 

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11th Commerce : Direct Taxes : Features of Income Tax in India |


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