Income Tax Act, 1961
The Income Tax Act was enacted in the year 1961 and is the statute under which everything related to taxation is listed. This includes levy, collection, administration and recovery of income tax.
What is Income Tax Act 1961?
Income Tax Act is basically aims to consolidate and amend the rules related to taxation in the country. It contains a long list of sections, each of which deals with different aspects of taxation in the country.
Indian government presents a Finance budget every year during the month of February. The budget brings in various amendments to the Income Tax Act.
Chapters of the Income Tax Act and Their Sections
Chapter | Explanation |
Chapter I | This is the first section and is hence for introducing the IT Act and to give a basic idea about the same. |
Chapter II | This chapter talks about the commencement and the extent of the Income Tax Act. |
Chapter III | The third chapter of the IT Act is basically about the charge of income tax, the scope of total income, dividend income, and income arising as a result of working abroad and so on. |
Chapter IV | This chapter deals with all forms of income that do not form part of the total income. These include income from property, trusts, institutions, incomes of political parties etc. |
Chapter V | The fifth chapter is about incomes of other individuals that form part of the assessee's income. This includes income from capital gains, from businesses, from house property etc. |
Chapter VI | This deals with the transfer of income when there is no actual transfer of assets. This includes transfer as well as revocable transfer. |
Chapter VII | Chapter VII is basically about the deductions that are applicable on certain payments and certain incomes |
Chapter VIII | Chapter VIII deals with rebates and share of member in an association or body |
Chapter IX | This talks about double taxation relief that is rebate on income tax and relief in income tax |
Chapter X | This is about special provisions where payment of income tax is avoided. This includes agreements with foreign countries and also information about those countries with which there exists no agreement on tax payment |
Chapter XA | Lists down all general anti-avoidance rules for income tax |
Chapter XII | This section pertains to calculation of tax under certain special cases |
Chapter XIIA | This section deals with special provisions for incomes earned by Non-Resident Indians. This includes capital gains, short-term capital gains, provident fund etc. The chapter contains sections 110 to section 115BBE. These different sections list down different kinds of taxes applicable on incomes from various special cases like from royalty, dividends, foreign currency units etc. All the corresponding sections basically lists down taxation for income made my non-resident Indians. |
Chapter XIIB | This chapter lists down special taxation provisions applicable to certain companies. It has sections 115J to section 115JF. |
Chapter XIIBB | This lists down taxation process for conversion of a foreign company into an Indian subsidiary. |
Chapter XIIBBA | Special rules for tax payment by some individuals who are not businesses. |
Chapter XIIBC | Special provisions for a foreign corporate based in India. |
Chapter XIIC | Provisions concerning retail trade in India. |
Chapter XIID | Deals with the taxation process for profits made by domestic companies. Interest payable on non-payment of tax by these companies and cases when the company defaults. |
Chapter XIIDA | Lays down rules for tax on distributed income of a company |
Chapter XIIE | Deals with tax on distributed income of unit holders |
Chapter XIIEA | Special requirements for tax on income distributed by securitization trusts. |
Chapter XIIEB | Special provision related to income accrued by certain institutions and trusts. |
Chapter XIIF | Tax on income received from venture capital companies or venture capital funds |
Chapter XIIFA | Special provisions related to business trusts |
Chapter XIIFB | Special provisions related to accrued income of investment funds and income generated from it. |
Chapter XIIG | Special provisions with respect to taxation of shipping companies |
Chapter XIIH | Income Tax levied on fringe benefits |
Chapter XIII | Lists down all information about Income Tax authorities such as their appointment and control, jurisdiction, their powers and disclosure of information |
Chapter XIV | Chapter XIV contains a long list of sections starting from section 139 to section 152. This chapter deals with the whole return filing formalities. From obtaining PAN to filing returns online to methods of accounting. This also includes other amendments, rectification of mistakes, intimation of loss and other related cases. |
Chapter XIVA | Lists down provision for avoiding repetitive appeals like those which are already pending in the High court or Supreme Court. |
Chapter XIVB | Special provision for evaluation of ‘search cases’ |
Chapter XV | Lists down liabilities for each case, all general and special provisions, recovery of tax from non-resident Indians, private companies e.t.c |
Chapter XVI | This chapter is for firms and their assessment and taxation process. Also deals with changes in constitution, succession and their dissolution process |
Chapter XVII | This lists down the clauses for collection and recovery of tax. Also lists down the interest charged on late payment of taxes or in cases where recovery is made |
Chapter XVIII | Income tax relief to companies for the fact that they pay dividends to their shareholders. Relief in terms of tax to companies who are involved in charitable work via their foundation wings |
Chapter XIX | Deals with refunds pertaining to taxes in case more tax is paid to the IT department. Cases when an individual is eligible to get refund, correctness of assessment and interest on refund when there is no claim made. Sections 237 to 245 cover all aspects of this tax chapter |
Chapter XIXA | This deals specifically with settlement of cases. Sections 245A to 245L are included under this chapter. All aspects of settlement such as application, procedure, abatement f proceeding, recovery of sums are covered under this chapter |
Chapter XIX-AA | In accordance with the rules established, under this Act, the Central Government shall establish one or more dispute resolution committees, as may be necessary, for the resolution of disputes involving the persons or classes of persons, as the Board may specify, who may elect to have a dispute resolved under this Chapter with respect to a dispute arising from any modification of the specified order in his case and who meet the specified requirements. |
Chapter XIXB | All advance rulings come under the purview of this chapter. Sections involved are section 245N to 245V. Includes application for advance ruling, powers of authority, procedure and other related topics. |
Chapter XX | Deals with appeals made to the deputy commissioner and commissioner. Also includes appeals to the high court, Supreme Court and general aspects of revision by commissioner. |
Chapter XXA | Includes sections 269A to 269S. Is basically related to acquisition of immovable properties in certain cases to counteract tax evasion. All aspects of acquisition including jurisdiction of the same is covered under this chapter and its various sections. |
Chapter XXB | Lists down modes of payment in cases where correction of tax evasion is required. Deals with taking and accepting of loans and deposits for the same and their corresponding modes. |
Chapter XXC | Deals with purchase of immovable properties made by the central government in cases of transfer. Restrictions on the property, appropriate authority, rectification of mistakes, vesting of property are the few of the many aspects covered under this chapter. |
Chapter XXI | Includes sections 271 to 275 and lists down all penalties that are applicable to various taxpayers in the event of various cases. This pertains to all kinds of penalties such as those for non-disclosure, for non-payment of taxes, for failure to comply with various provisions of the section and so on and so forth. |
Chapter XXII | Section related to offences and the punishment for it |
Chapter XXIIB | With effect from 1 April 1990, Sections 280Y, 280Z, 280ZA, 280ZB, 280ZC, 280ZD, and 280ZE of Chapter XXII-B were removed. For the purposes of sub-section (6) of section 280Z or, if applicable, sub-section (4) of section 280ZC, no tax credit certificate awarded under section 280Z or section 280ZC shall be shown before the Assessing Officer after 31 March 1991. Prior to 1 January 1965, the Finance Act of 1965 inserted Chapter XXII-B. |
Chapter XXI | Section 275A to section 280D is included under this chapter. The section deals with prosecution and offences with respect to compliance failure, and other details about how the prosecution process will be taken forward. |
Chapter XXIII | Sections 281 to 298 come under this chapter and it covers almost all miscellaneous topics that cannot be put under any of the specific tax chapters stated above. Contains generic as well as special cases that may arise with respect to the taxation process for various taxpaying entities. |
Schedules to the Act
Schedules to the Income Tax Act 1961 are various annexures that were added and amended to include topics and scenarios which were not previously covered. Various schedules have been added to the Income Tax Act at different points of time, to make the IT Act more inclusive and comprehensive.
Income Tax Act 1961 – Provisions
The provisions that are included in the Income Tax Act are mentioned below:
- Appeal application.
- Instructions that can be given to subordinate authorities.
- Accessing tax authorities.
- Transactions mode undertaking.
- Taxability of income.
- Statement of financial transactions.
- Annual information.
- Appeals can be made under Section 261 (Supreme Court).
- Appeals can be made under Section 260A (High Court).
Key Features of the Income Tax Act 1961
Some of the main features of the Income Tax Act 1961 are mentioned below:
- Under certain cases, deductions can be claimed.
- Depending on the salary an individual, the amount of tax that must be paid increases. In case the salary is high, higher tax needs to be paid.
- The tax that must be paid depends on the income tax slab the individual falls under.
- Tax that must be paid depends on the income that was earned in the previous year.
- The taxation is controlled by the Central Government.
- Individuals are not allowed to transfer the tax.
Residential Status Under the Income Tax Act
Income Type | Non-Resident | Resident but not-Ordinary Resident | Resident and Ordinary Resident |
Foreign income in the past that has not been taxed | Non-taxable | Non-taxable | Non-taxable |
Income has been generated from abroad and business or profession is abroad | Non-taxable | Non-taxable | Taxable |
Income has been generated from abroad and business or profession is in India | Non-taxable | Taxable | Taxable |
Income has been generated in India | Taxable | Taxable | Taxable |
Income that has been received in India | Taxable | Taxable | Taxable |
Income Tax Act 1961 – Objectives
Listed below are some of the objectives:
- Reduction of balance due to payment difficulties.
- Increase and decrease of tax rates based on the economy.
- Non-Revenue Objective.
- Full employment.
- Price stability.
Income Tax Act – Applications
The different ways by which the act is implemented in India are mentioned below:
- Circulars and notifications provided by the government.
- Judicial announcements.
- Finance Act.
- Income Tax Rules, 1962.
FAQs on Income Tax Act 1961
- How many schedules are specified under the Income Tax Act?
There are fourteen schedules specified under the Income Tax Act.
- What is the objective of Income Tax Act, 1961?
The objective of Income Tax Act, 1961 is to foster economic expansion, create a society with full employment, regulate economic ups and downs, stabilise prices, and limit tax disparities. The country's tax laws need to be updated and consolidated as the major goal.
- How many sections are present in the Income Tax Act 1961?
298 sections are present in the Income Tax Act 1961.
- How many chapters are present in the Income Tax Act 1961?
23 chapters are present in the Income Tax Act 1961.
- When was the Income Tax Act established in India and by whom?
The Income Tax Act was established in India on 1 April 1961 by the Parliament of India.
- What are the components of Income Tax Act, 1961?
The Income Tax Act, 1961 consists of 298 sections and 14 schedules and came into effect from 1 April 1962 with the aim of identifying a taxpayer's taxable income, tax debt, appeals, fines, and legal troubles.
News about Income Tax Act 1961
Union Budget 2024: Review of the Income Tax Act, 1961
Finance Minister Nirmala Sitharaman during the Union Budget 2024 announced that there will be a comprehensive review of the Income Tax Act, 1961.
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