Income Tax Act

What is the Income Tax Act 1961?

The Income Tax Act, 1961, manages and governs the levy, collection, and administration of direct taxes in India. Income tax is applied to all individuals who earn income in India, regardless of their citizenship status. Under this law, all taxpayers have to pay taxes at prescribed rates.

• This act applies to the whole of India.
• It contains 700 sections, 23 chapters, and 14 schedules.
• The parliament passes the annual finance act every year to address the changing economic situation.

Features of the Income Tax Act 1961

The features of the IT Act 1961 are as follows:

• Income tax is a type of direct tax that needs to be handled individually; you cannot transfer it to another person.
• The central government of India controls it.
• It is applicable to the income of the taxpayer earned in the previous year.
• Tax calculation is applied on the assessee's income tax slab.
• The tax deductions applied to a pre-decided maximum limit per fiscal year in certain cases.
• The government applies a progressive income tax rate so that wealthy people have to pay higher tax rates.

Provisions of the Income Tax Act 1961

The provisions of the Income Tax Act are classified based on different grounds, and they are explained below:

1. Meaning and Definitions: This section of the provision outlines the meanings of the various terms used in the act.
2. Machinery provisions: This includes the method for calculating the expenditure, income, and value of an asset.
3. Levying provisions: It deals with the taxation part, the specific rates of the tax, cess, surcharge, and other levies.
4. Assessment provisions: When the Ministry of Finance wants to confirm that no income has escaped taxation, it passes the assessment order for the taxpayers.
5. Penal provisions: If there is any non-compliance with the provisions of the act, then the consequences are dealt with under this provision.