The Income Tax Act, 1961 is the primary legislation governing income tax in India. It provides the framework for the assessment, levy, and collection of income tax. The Act lays down the rules and regulations regarding the computation of taxable income, determination of tax liability, filing of returns, exemptions, deductions, and various other provisions related to income tax.
The Act has been amended several times since its enactment to incorporate changes in tax laws, economic policies, and to address emerging issues. It is a comprehensive piece of legislation that covers various aspects of income tax applicable to individuals, businesses, corporations, and other entities.
Some key features and provisions of the Income Tax Act, 1961 include:
- Classification of income into different heads such as salary, house property, business or profession, capital gains, and other sources.
- Determination of residential status of individuals and taxation of income based on residency status.
- Rates of taxation applicable to different categories of taxpayers and income slabs.
- Provisions for deductions, exemptions, and rebates available to taxpayers to reduce their taxable income.
- Rules for computing income from various sources, including provisions for depreciation, allowances, and deductions.
- Provisions for filing income tax returns, assessment procedures, and appeals.
- Penalties and prosecution for non-compliance with tax laws.
- Tax treatment of various investments, transactions, and entities.
Overall, the Income Tax Act, 1961 forms the backbone of India’s tax system and plays a crucial role in revenue generation for the government while also regulating the taxation of income in the country.