INCOME TAX ADVISORY
Income Tax in India: Taxes in India can be categorized as direct and indirect taxes. Direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that somebody else collects on your behalf and pays to the government eg restaurants, theatres and e-commerce websites recover taxes from you on goods you purchase or a service you avail. This tax is, in turn, passed down to the government.
Direct Taxes are broadly classified as :
- Income Tax – This is taxes an individual or a Hindu Undivided Family or any taxpayer other than companies, pay on the income received. The law prescribes the rate at which such income should be taxed
- Corporate Tax – This is the tax that companies pay on the profits they make from their businesses. Here again, a specific rate of tax for corporates has been prescribed by the income tax laws of India
Income Tax Department
A government agency that undertakes the direct collection of tax in India is the Income Tax Department. All operations of the department are handled by the Central Board for Direct Taxes (CBDT). Individuals can get various details such as international taxation, tax laws and rules, organisational setup, etc., on the official website of the department.
Income Tax Act
Passed in 1961, the Income Tax Act of India handles all income tax provisions as well as any tax deductions that may be applicable. Since its introduction, there have been many changes to the law because of economic situations and inflation.
Income Tax Rules
The legislature enacts the Income Tax Act, 1961, to administer and govern income tax in the country, but the Income Tax Rules, 1962, were created in order to help in the application and enforcement of the law constituted in the Act. Moreover, the Income Tax Rules can only be read in conjunction with the Income Tax Act. The Income Tax Rules are within the framework of the Income Tax Act are not allowed to override its provisions.
Who should pay Income Tax in India?
The amount of tax that must be paid depends on the individual’s age and the income they make. The entities listed below?are required to pay tax and file their income tax returns.
- Artificial Judicial Persons
- Corporate firms
- Association of Persons (AOPs)
- Hindu Undivided Families (HUFs)
- Local Authorities
- Body of Individuals (BOIs)