The Income Tax Act, 1961 is the statute under which the Government of India levies and collects income tax from individuals and organizations. It came into force on April 1, 1962, and has been amended many times to suit the evolving economy.
Structure: The Act is divided into various chapters and sections, covering everything from definitions and computation of income to penalties and prosecution.
Scope:
Applies to individuals, Hindu Undivided Families (HUFs), companies, firms, LLPs, associations of persons (AOPs), and others.
Tax is levied on income earned in a financial year (April–March).
Types of Income Taxed:
Salaries
House Property Income
Profits and Gains from Business or Profession
Capital Gains
Income from Other Sources
Tax Rates:
Vary by income slab and entity type.
Progressive structure for individuals (higher income = higher tax rate).
Deductions & Exemptions:
Sections like 80C, 80D, 10(14), etc. offer deductions to reduce taxable income.
Filing Requirements:
Annual Income Tax Returns (ITRs) must be filed by individuals and businesses above certain income thresholds.
The Central Board of Direct Taxes (CBDT) administers the law, issues circulars and notifications, and manages assessments and enforcement.
The Act is updated annually through the Finance Act, which may change tax rates, add or remove deductions, or introduce new provisions.
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Short title, extent, and commencement
Definitions (Section 2)
Charge of Income Tax
Scope of total income (resident vs non-resident)
Section 4 – Charge of income tax
Section 5 – Scope of total income
Section 6 – Residential status of an assessee
Divided into 5 heads of income:
Salaries (Sections 15–17)
Income from House Property (Sections 22–27)
Profits and Gains of Business or Profession (Sections 28–44)
Capital Gains (Sections 45–55)
Income from Other Sources (Sections 56–59)
Common deductions include:
80C – Investments in LIC, PPF, NSC
80D – Medical insurance
80G – Donations to charitable institutions
80E – Interest on education loans
80U – Disabled individuals
Clubbing of income (Sections 60–64)
Set-off and carry forward of losses (Sections 70–80)
Filing of Income Tax Returns (ITRs)
Belated and revised returns
Assessments:
Self-Assessment (140A)
Regular Assessment (143)
Reassessment (147)
Advance Tax
Tax Deducted at Source (TDS)
Tax Collected at Source (TCS)
Interest and penalties for defaults
Appeal process
Income Tax Appellate Tribunal (ITAT)
High Court and Supreme Court appeal routes
Penalties for concealment of income
Prosecution for willful tax evasion
Power to issue notifications, exemptions, rules, etc.
Schedules provide additional rules, tax rates, forms, etc.
Example: Schedule I – Rates of tax
| Bharat Income Tax Act |
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