Income Tax Act

Income tax is a tax levied on the income of an individual or an entity. It is one of the primary source of revenue of the government of India. The government undertakes various functions including welfare and development activities related to health, education and rural development etc. for which it requires public finance. Taxes are one of the major source through which the government raises revenue for public spending and it has been broadly categorized into the following two sections:

·        Direct taxes- These include taxes which are paid by the person on whom these are levied like income tax, corporation tax, etc.

·        Indirect taxes- These include taxes levied on goods and services rather than on income or profits like Goods and Services Tax.

Income Tax is usually the most visible and discussed component of the Indian tax system. It is generally believed that taxes on income are phenomena of modern days. However, there is enough evidence to show that taxes on income were levied in ancient days in India as well. In this regard, references can be made to the ancient scriptures like Manusmriti and Kautiliyan Arthashastra. 

In the modern India, the law related to income tax was introduced for the first time in 1860 to overcome the financial crisis of 1857. Thereafter, the Income Tax (IT) Act of 1886, IT Act of 1918 and IT Act of 1922 were introduced, however, these acts were repealed later due to their inconsistency with the changing requirements of the Indian society. Later, with the consultation of the Ministry of Law the Income Tax Act 1961 was brought into effect which is currently operative in India.