Taxes levied by means of the government are of sorts- Direct taxes and indirect taxes. indirect taxes are those which are levied on services and goods. Direct taxes, however, are levied on earnings and profits. for example, provider tax which you pay in a restaurant is an indirect tax while income Tax that is deducted from your revenue each month in the shape of TDS is an example of direct tax.
Income Tax refers to a percent of your income that you are liable to pay at once to the government. The money accumulated through this direct tax path is utilized by the government for infrastructural developments and also to pay the employees of central and state government bodies.
Income Tax Act of India, passed in 1961, governs the provisions for income tax as well as the various deductions that are applicable to it. However, since 1961, the law has been amended several times to take care of inflation and other socio-economic situations.
Income Tax Overview
Income Tax is undoubtedly the most important source of revenue for the Indian government. It is established as an inevitable imposition on the citizens in order to raise funds for fulfilling the development & defence needs of the country.
Taxes imposed on income, purchase, sale, and property help the government to run different government embodiment and machinery.
In India, the first Income Tax Act was introduced in 1860. It wasimplied by James Wilson to overcome heavy losses suffered by the British
Government due to India’s freedom movement in 1857. The history of Income Tax in India is divided into 3 different periods:
3. 1914 till date
Currently, the Income Tax Act 1961 is applicable in India. In 1956, the government referred the request to impose Income Tax Act. The Law Commission further submitted its report on the Income tax Act in 1958and the same year, Chairman Shri Mahavir Tyagi, chaired the Direct Taxes Administration inquiry Commission.
The Income Tax Act, 1961 was introduced to the public. Since then, it has undergone amendments from time to time.
Any Indian citizen aged below 60 years is liable to pay income tax if their income exceeds 2.5 lakhs. If the individual is above 60 years of age and earns more than Rs.3 lakhs, he/she will have to pay taxes to the government of India. Additionally, the following entities that generate income are liable to pay direct taxes:
· Hindu Undivided Family (HUF)
· Body Of Individuals (BOI)
· Association of Persons (AOP)
· Local Authorities
· Corporate firms
· All Artificial Juridical Persons