In India, constitution is the supreme document & parent Law. All other laws are enacted from it and within its power. It gives power to Central Government to levy a tax on income. Accordingly, Income Tax Act, 1961 was enacted. This Act replaced the old Act “Income Tax Act, 1922”.
This Act applies to whole of India and has 298 Sections & Fourteen Schedules. Every year the Act is changed by budget (Finance Act) of that year.
Income Tax is in Nature of Direct Tax since it is levied & collected directly from the income of a person. Any income earned by a person comes under the radar of income tax. However, many types of income tax exempted from income tax.
For the purpose of computation of income tax, income is divided into Five heads, as given below:
- Income from Salary (Paid by employer).
- Income from House property (received as rent).
- Income from Profit & Gains of business or profession.
- Income from capital gain (By sale of Asset).
- Income from other sources (other than above sources).
So income is calculated under each head and then Gross Total Income is calculated.
From the Gross total income, deduction under chapter VI-A is deducted. These deduction includes section from 80C to 80U.
Finally, the total Income of a person is taxed at the rate specified for that particular year in the finance Act.
The income tax is paid on or before due dates. Some of the persons need to pay income tax in advance also. Annually, income tax return is also filed containing the details of income tax calculation.
Read here simple steps for checking income tax return status.
Once you filed Income tax return, you may receive intimation under section 143(1) for completion of assessment of your income tax return. It may contain demand for balance amount or refund of income tax.
You can also avoid income tax and can plan for income tax so that less tax is paid.
Read here income tax saving tips.
If you Pay excess income tax, you can claim refund of that or if excess TDS is deducted by your employer then also you can claim refund of that.
TDS is also deducted as per income tax act. Similarly, TCS is collected.
Read here Latest TDS rates
I hope you have got the basic understanding of income tax. For more information on “What is income tax” please comment.
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