Income Tax Act, 1961

What is Income Tax?

Income Tax is a kind of tax that the government of a country imposes on the citizens to pay on their income. For example, a businessman or a taxpayer must file income tax every year as part of their obligations. Income tax is one of the key sources of revenue for the government of a country. These are funds used for public services and providing infrastructure to the country. The Constitution of India gives the government the right to impose income tax on the country’s citizens. There are mainly two types of taxes in India: Direct and Indirect taxes. Citizens have to file direct taxes, and for indirect tax, we pay through the purchase of goods and services. But, first, let’s learn more about Income tax and the Income Tax Act,1961.  

Who pays Income Tax in the Country?

Everyone in India pays taxes, some directly and others through indirect means. Income tax is usually imposed on the businessmen and working individuals of the country. Individuals have to pay income tax if their yearly income is above ₹2,50,000 lakhs. Additionally, if you are a senior citizen, ₹3,00,000 lakhs is the income. 

Income Tax Act, 1961

The Government of India passed the Income Tax Act 1961 regarding the income tax and deductions for the country’s citizens. It’s a comprehension Act that focuses on the various rules and regulations that govern the country’s taxation system. 

The Income Tax Act provides that the Indian Government can levy, administer, collect and recover income tax for the Indian government. This Act has around twenty-three chapters and two hundred and eighty sections. The chapters mainly deal with paying income tax when you have the following: 

• Salary 

• House property income 

• Capital gains 

• Profits from business

• Other sources of income

Each year the Government of India presents the finance budget in February. Through the budget, they make various amendments to the Income Tax Act. These amendments become a part of the Income Tax Act when the new financial year in the country begins. However, this happens only after the President of India approves the bills.

Deductions under the Income Tax Act 1961

There are various types of deductions that you can claim under the Income Tax Act 1961. Some of these deductions for income tax that individuals need to pay include: 

• Part 80C to 80: In this section of the Income Tax Act, individuals and businessmen can reduce their taxable income by ₹1,50,000.

• Part 80CCD: In this section of the Income Tax Act, the focus is on income tax deductions that an individual or businessmen can avail. If anyone has made a contribution towards the New Pension Scheme and Atal Pension Yojana. Then they are eligible for an income tax deduction.

• Part 80D: If an individual has medical expenses through the year, they can claim income tax deductions for it. Additionally, if you have health insurance, you can claim deductions for it while paying income tax.

• Part 80DD: If an individual has disabilities or is a differently-abled person and a citizen of India, they can claim deductions if they can claim deductions under the income tax for their medical examination. Additionally, if an individual belongs to a Hindu Undivided Family and is undergoing medical treatment, they can claim deductions under it. 

• Part 80DDB: If an individual is undergoing treatment for a particular disease, they can claim tax deductions for their medical expenses. 

• Part 80TTA: When an individual or a person belonging to a Hindu Undivided Family has interest income, they are eligible for a deduction. The deduction in their income tax is going to be ₹10,000.

• Part 80U: When an individual is physically disabled, they are eligible for a deduction. This deduction will be up to ₹1,00,000 in their income tax. 

Conclusion

It is important to know about taxes and the tax deductions. Paying taxes is the responsibility of every citizen that is eligible for paying it. When you are paying your taxes, you are helping in the development and growth of the country.