INDIAN INCOME TAX ACT-1 -- DIFFERENT KINDS OF TAXES

Taxes are of two types

Direct Tax and

Indirect Tax

Direct Tax is the tax, which is levied directly on people by the government; here taxpayer directly pays the tax to the govt.

While indirect tax is the tax, which is levied indirectly on people by the government, which is passed on by seller or manufacturer, who collects it incidentally, to the government.

Income Tax is paid directly to the government therefore it is a direct tax while excise duty is paid by people to the manufacturer who pays it to the government, therefore it is an indirect tax.

The Constitution of India (COI) has given power to levy tax to central and state government under seventh schedule.

The taxation in India is either charged by the state governments or by the central government.

In the basic scheme of taxation in India, it is conceived that central government will levy and collect tax revenue from Income Tax (except on Agricultural Income), Excise (except on alcoholic drinks) and Customs

While state government will get tax revenue from sales tax, excise on liquor and tax on Agricultural Income and

The municipalities will get tax revenue from octroi and house property tax.

In India, the Central Government has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution of India to levy tax on all income other than agricultural income (subject to Section 10(1)).

 The Income Tax Law comprises

(1). The Income Tax Act 1961,

(2). Income Tax Rules 1962,

(3). Notifications and Circulars issued by Central Board of Direct Taxes (CBDT),

(4). Annual Finance Acts and

(5). Judicial pronouncements by Supreme Court and High Courts.

The government of India imposes an income tax on taxable income of all persons including

(1). individuals,

(2). Hindu Undivided Families (HUFs),

(3). companies,

(4). Partnership firms,

(5). association of persons,

(6). body of individuals,

(7). local authority and

(8). any other artificial judicial person.

Levy of tax is separate on each of the persons/entity.

The levy is governed by the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by CBDT and is part of the Department of Revenue under the Ministry of Finance, Govt. of India.