Learn Basics about Income Tax in India

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Taxes play a very important role in the economy. They are the legal obligation on the people and businesses to be paid under the act of income tax law. There can be different motives behind the rate of tax. The objectives set by the government are usually aimed to cater the economic and social goals as well. Income tax is one of the main sources of the government revenue, which is then used for the welfare of the country and economic development.

Introduction of income tax in India

The foundation of income tax in India was laid down by the British in 1857. For a long time there had been demonstrations and observations about it and the first income tax act was introduced in 1886. The system that started at the time is still implemented, but with some modifications. There was another income tax act which was passed in 1961 but it lived for a short time and was replaced by the income tax act of 1922 which started to come into practice by 1961.

What is the current income tax act in India?

The current income tax act is the income tax act which was approved by the taxes inquiry committee and the law ministry in 1961. It was fully executed in 1962. It is a very compendious act consisting of 298 sections along with many sub-sections. These sub-sections are further divided into many schedules, rules, sub rules etc. There have been amendments in this act by many other acts since it was first introduced.

Person and Assessee:

These are two of the basic terms that are used in the income tax act of India. The person in this act is a vast term that includes any male or female human being, any company who has been registered under the company act of India, the entities who have partnership agreements, cooperative societies who run an enterprise together and are called as associations of persons.

Assessee means any person who is liable to pay tax under this income tax act. The three main categories of this include ordinary assessee, representative assessee or deemed assessee or an assessee in default.

Who are supposed to pay tax under income tax Act India?

According to the income tax act the tax is to be paid by all the companies irrespective of their income, all partnership firms, and individuals including the non-residents, local authorities, Hindu undivided families, artificial juridical persons, societies and charitable or religious trusts earning a certain amount of income.

The income tax is mainly divided into direct taxes and indirect taxes. The wealth tax, income tax, gift taxes is known as the direct taxes and sales tax and excise duties are known as indirect taxes. There is an assessment year in India’s income tax act which starts on 1st April to 31st March. It includes a 12 month period. It is the financial year of the government in which the tax is collected from the person and is assessed to tax. The tax system of India includes a lot more details with every section included in the income tax act.

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