Income tax is a sort of tax that you pay directly to the government on your earnings or profits. Income tax collection is the responsibility of the Indian government. Direct and indirect taxes are the two types of taxes.
Also Read: Income Tax Return Filing
Direct tax is a type of tax applied on earnings and income that you pay directly to the government. Indirect tax, on the other hand, is a tax charged on products and services that is collected by someone else on your behalf and paid to the government, such as at theaters and restaurants. For example, service tax is an indirect tax that you pay at a restaurant, whereas Income Tax is a direct tax that is withdrawn from your salary every month in the form of TDS.
The money raised by direct taxes is utilised by the government for infrastructure improvements as well as to pay central and state government personnel.
In 1961, India passed the Income Tax Act. The provisions for income tax, as well as the different deductions that apply to it, are governed by this Act. Since 1961, the Act has been updated several times to account for inflation and other socioeconomic variables.
Overview of Income Taxes
The most important source of revenue for the Indian government is income tax. It has been established as an unavoidable burden on citizens in order to raise revenue for the country’s growth and defense needs.
Taxes on income, purchases, sales, and property assist the government in operating various government entities and apparatus.
The first Income Tax Act was passed in India in 1860. It was suggested by James Wilson as a way to compensate for the British government’s huge losses as a result of India’s independence movement in 1857. In India, the history of income tax is divided into three periods:
- 1860 – 1885
- 1886 – 1914
- 1914 till date
In India, the Income Tax Act of 1961 is now in effect. The government referred the request to enact the Income Tax Act in 1956.
The Income Tax Act of 1961 was signed into law. It has undergone a number of revisions since then.
Income Tax Regulations
The Income Tax Act of 1961 was enacted by the legislature to govern and manage income tax in the country. However, in 1962, the income tax rules were established to aid in the enforcement and administration of the law enacted in the Act. Furthermore, the income tax rule must be considered in conjunction with the Income Tax Act. The Income Tax Rules are written within the framework of the Income Tax Act, and they are not permitted to override its provisions.
Types of Taxes in India
In India, there are two sorts of taxes, according to the Income Tax Act:
It is directly borne and paid by the person on whom it is imposed, such as wealth tax, income tax, gift tax, and so on. This tax is paid directly to the government by the taxpayer, without the use of an intermediary.
It is an indirect tax whenever a tax is passed on from one person to another, such as sales tax or Value Added Tax (VAT). This sort of tax is paid to the Internal Revenue Service (IRS) in an indirect manner.
Who are the Taxpayers, exactly?
Any Indian person under the age of 60 who earns more than Rs 2.5 lakhs is required to pay income tax. If a person is above 60 years old and earns more than Rs 2.5 lakhs, he or she must pay taxes to the Indian government.
In addition, the following income-generating entities are subject to direct taxation:
- Undivided Hindu Family
- Body Of Individuals
- Association of Persons
- Local Authorities
- Corporate firms
What is the procedure for submitting an ITR?
Taxation is the government’s primary source of revenue in India, as it is in other countries. As a result, in addition to paying taxes, Indian nationals must also file an Income Tax Return (ITR). Unlike in the past, filing an ITR is not as complicated as it appears. Following a few simple procedures, an individual can file their income tax return online. Let’s take a look at how to file an ITR electronically.
These are the documentation you should have on hand before you begin submitting your income tax return.
- Permanent Account Number
- Bank Account Details
- Form 16
- Details on Investments
Suggested Read: Income Tax Planning