Income Tax Introduction
1. Income-tax is a tax levied and collected by the Central Government on income of a person.
2. Income-tax is calculated at specified rates on total income of a person and paid directly to the Central Government.
3. It was first introduced in India for the first time in 1860.
4. The provisions relating to the income-tax are governed by the Income-tax Act, 1961.
Income Tax Act 1961
The provision of income tax are contained in the Income Tax Act, 1961 and it extends to the whole of India from 01/04/1962. Income Tax is a Law and Law means rules and regulations. All rules and regulations are arranged in:-
• Sub- Sections • Clauses and Sub-Clauses Explanations etc
CBDT- Central Board of direct taxes
IT Act 1961, gives power to CBDT to make various rules and amendments related to Income Tax.
1. Previous Year – Year in which income is earned by a person. It is immediately preceded by Assessment year.
2. Assessment Year – Year in which income is assessed and tax paid to Government. It is immediately following the previous year.
E.g. 2019-2020 – Previous Year
2020-2021 – Assessment Year
DIRECT TAX AND INDIRECT TAX
|It is levied on income and activities conducted.|
|The burden of tax cannot be shifted in case of direct tax.|
|It is paid directly by person concerned.|
|It is paid after the income reaches in the hands of the taxpayer|
|Tax collection is difficult.|
|Example Income tax, wealth tax etc.|
|It is levied on product or services.|
|The burden of tax shifted for indirect taxes.|
|It is paid by one person but he recovers the same from another person i.e. person who actually bear the tax ultimate consumer.|
|It is paid before goods/service reaches the taxpayer.|
|Tax collection is relatively easier.|
|Example GST, excise duty custom duty sale tax service tax|