The Income Tax Act, 1961

Income Tax Act, 1961 is an act implemented under the Central Government of India to levy, collect & recover Income-tax from the common citizens in India. It came into effect from 1st April 1962. 

Tax is the financial charge levied on the citizens and demanded by the Government on different types of income. Taxes are the most important modes of income for the Government, which are utilised for the welfare of the common people of the nation.

Provisions of the Act

• Income-tax Act, 1961 has provided different sets of provisions regarding the collection of taxes on income received in advance as well as the income of which the amount has not yet been received.
• There are separate slabs for the Tax calculation on the Gross Income during an assessment year.
• The Act also allows Tax Deductions in favour of the taxpayer. A person should keep track of his TDS deducted while calculating his final tax liability at the end of a financial year.
• The ITR should be filed yearly on time even if the payable tax is NIL.

Purpose of Taxation

• The money raised from the collection of taxes is spent on the development of roads, schools, and hospitals, other public properties and market regulations or legal systems, etc.
• Redistribution of resources and Reduction of the financial gulf between the richer section and the poorer section of the society.
• Taxes are levied on certain products to eliminate externalities such as the taxes on tobacco to discourage smoking.

Who is a person under Income Tax?

 As per the Income Tax Act, the term ‘person’ includes –

1. An individual.
2. A Hindu Undivided Family.
3. A Company.
4. A Firm.
5. An association of persons or body of individuals whether incorporated or not; 
6. A local authority; and 
7. Every artificial judicial; person not falling within any of the preceding

Various Source of Income under Income Tax Act 1961

1. Salaries

2. Income from house property

3. Profit and gains of business or profession

4. Capital gains

5. Income from other sources

Tax is a mandatory monetary charge levied on every individual by the government, as we have discussed what taxes are the various sources of taxes, its purposes, and provisions. There are a number of Provisions provided under law for taxpayers as per their requirements. The government has provided various forms to pay income tax whether a person is an individual or HUF or a company or he is an ordinary resident or non-ordinary or non-resident person, as per their applicability they can file income tax.