Income Tax

The Income Tax Act of 1961 has a broad scope. It authorises the Internal Revenue Service (ITD) to charge tax on the income of people, enterprises, corporations, local governments, organisations, and other artificial juridical entities. As a result, the Income Tax Department impacts various stakeholders, including enterprises, professionals, non-governmental organisations, income-earning residents, and municipal governments. Due to the authority granted by the Income Tax Act to tax foreign enterprises and professions, the Income Tax Department is responsible for all issues relating to Double Taxes Avoidance Agreements as well as several other areas of international taxation, such as transfer pricing. Combating tax evasion and tax avoidance tactics is a critical responsibility of the ITD.

What is the Definition of Income Tax?

Individual and corporate income is taxed by the government, which relies on the money created by individuals and businesses for a fiscal year. Income tax is a significant source of revenue for the government. These funds partially fund subsidies for farmers and the agricultural sector and government welfare programs and initiatives. There are two main types of taxes: direct and indirect. The bulk of them is direct taxes. Taxes levied directly on a person’s income are called direct taxes. An excellent example of a direct tax is the income tax.

Direct Taxes are grouped into the following Categories

Income Tax- It is a kind of tax that individuals, Hindu Undivided Families, and other taxpayers, other than corporations, must pay on their earnings. 

Wealth Tax- The amount of tax due is determined by the number of properties owned and the market value of those properties annually.

Corporate Taxes- Domestic enterprises, aside from shareholders, will have to pay corporate tax. Foreign firms that produce an income in India will also pay corporate tax.

Capital Gains Tax- It is a direct tax levied on capital gains or investment income. Investments in farms, bonds, shares, companies, art, and houses fall under capital assets.

Who is Responsible for Paying Income Tax? 

According to the Income Tax Act, various kinds of taxpayers have been divided into distinct categories to apply varying tax rates to different taxpayers.

Taxpayers are divided into the following categories:

• Individuals
• Firms 
• Corporations 
• Hindu Undivided Family 
• Association of Persons 
• Body of Individuals 
• Hindu Undivided Family

Individuals are also divided into two major categories: residential and non-residentials. Individuals in India must pay tax on their worldwide income, including money received in India and overseas. For taxation reasons, Resident Individuals are further divided into the groups listed below:

• Individuals under the age of 60 are included.
• Individuals who are beyond the age of 60 but under the age of 80
• Individuals who have reached the age of 80.

Payment of Income Tax

Tax is deducted at the point of source (TDS)

Whenever a payment is made to a receiver, income tax is deducted at the point of origin by the payer while making the payment. The income receiver may claim a credit for the amount of TDS collected by reducing the amount claimed against the ultimate tax due.

Tax deducted at source (TCS)

“TCS” means “tax collected at source.” Tax paid by the seller but collected from the customer is known as Tax Collected at Source (TCS). Income tax section 206C specifies a comprehensive list of products that may be used for this purpose.

Advance Tax

When a taxpayer’s expected income tax burden for the year exceeds Rs 10,000, they must pay tax in advance. Payment of advance tax payments must be made by the specific deadlines set by the government.

Electronic Funds Transfer (EFT)

Taxpayers may make online payments for advance tax and self-assessment tax on the NSDL website. On the other hand, the taxpayer should access a net banking facility via an authorised bank.

Income Tax Department

The Income Tax Department (commonly known as the IT Department or the ITD) is a government organisation responsible for collecting direct taxes on behalf of the Government of India. It is a department of the Ministry of Finance that reports to the Department of Revenue. The Central Board of Direct Taxes is in charge of the Income Tax Department, the central level of government (CBDT). The IT Department’s primary mission is to implement several direct tax regulations, the most significant of which is the Income-tax Act, 1961 (the Income-tax Act), to collect income for the Government of India. 

Income Tax Returns (ITR) calculate a person’s tax. An income tax return shows a person’s status, income, deductions, and, if applicable, tax due or refund.

Conclusion

Money produced in a wage is not the only kind of income available. The term ‘income from other sources’ encompasses income from real estate, earnings from the business, gains from the profession (such as bonuses), capital gains income, and income from other sources. In addition, the government often offers some leeway, allowing for a variety of deductions to be taken from an individual’s income before the amount of income tax is determined. If there is a mismatch in your tax returns, the IRS may issue you letters under multiple parts of the Income-tax Act (ITR). Due to the department’s new strict rules, many individuals have been sent notifications.