Income tax: Know the features

The terms “income” and “tax” are combined to form the word “income tax.” It implies that income tax is a type of direct tax levied against an individual’s income. The current assessment year’s income-tax rates are applied to the net taxable earnings that a person earned or received during the prior year.

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For the Indian Central Government, it is a significant source of income.

Income tax: Who is liable to pay?

Any individual or Hindu undivided family whose combined income exceeds the exemption threshold must pay income tax. Additionally, a firm, a company, a cooperative society, an association of people, a group of individuals etc., are all subject to paying income tax.

Features of income tax

The “Income Tax Department,” which has offices all around the nation, assists the Central

Government (Ministry of Finance) in the administration of income tax. The “Central Board of Direct Taxes” (CBDT), which the central government established, has been given comprehensive power over the income tax division by making regulations regarding relevant issues.

A tax is, therefore, an obligation that must be met by the people who are responsible for paying it. As a result, failing to pay taxes is a crime. The public authority and the taxpayers do not directly exchange benefits.

Income tax is direct tax: The person who is liable for income tax is responsible for paying it. It cannot be transferred to anyone else. A person who receives money is required to pay income tax out of his pocket and is not permitted to transfer the cost of paying taxes to another party.

Income tax is a central tax: The Central Government imposes and collects income taxes.

Income tax is computed based on net taxable income from the prior year, with taxable income during the prior year being assessed per Income-tax Act provisions.
Exempted limit of income: The Income-tax Act states that a specific amount of income is exempt from income tax. The term “exempted limit of income” refers to this sum. Any income that exceeds this cap will be subject to taxation. Each evaluation year’s cap could be different. When comparing male and female assessees, this exemption limit may differ.

Payable by every assessee: Each artificial person is an assessee, along with every individual, Hindu joint family, business, and organisation.

Income tax calculation: The income tax is calculated using the rates of income tax that are in effect for the current assessment year.

Income tax is paid in the current assessment year: Income tax is calculated, paid, and recovered in the assessment year that corresponds to the prior year; for example, income tax on income earned up to March 31, 2017, must be paid in the relevant assessment year, 2017–18.

Progressive rates of income tax: Income tax is levied at progressive rates on escalating income levels. For each assessment year, the income slab could change.

Charged at the prescribed rate(s): Income tax is levied at a specified rate (s). For various income levels and individuals, different income tax rates apply. Tax rates for normal incomes are established by the yearly Finance Act, whereas those for some special incomes are established by the Income Tax Act.

Applicability: Income Tax is applicable throughout India, including Jammu and Kashmir.
Income tax refund: Reimbursement of excess taxes paid to the government during the tax year is known as Income tax refund. Note that PAN Card and Aadhaar card has to be linked for any kind of income tax refund that has to be received in the account. After the ITR is processes, the IT department refunds the amount in the Aadhaar linked registered bank account within 45 days. Note that for people who have not linked their Aadhaar with PAN card,, the IT department has made their PAN card inactive. In such case they won’t receive the ITR refund, unless the PAN card is made active by linking it with Aadhaar card.

FAQs

What is the purpose of income taxes?

Governments receive funding from income taxes. They are used to pay for debts owed to the government, fund public services, and supply residents with goods. Many states and municipal governments, in addition to the federal government, also demand payment of income tax.

What are the benefits of income tax?

The nation benefits as much as you when you file your income tax return. The government uses the taxes you pay to strengthen the nation's infrastructure and other services like healthcare and defence. The more people who register, the more money the government can spend to give us a good country.

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