Income tax law

Income tax law

refers to the body of law governing the imposition of taxes on income earned by individuals and entities. Below is a brief overview of the key provisions in legal terms:

1. Charge of Income Tax: Income tax is levied on the total income of individuals, Hindu Undivided Families (HUFs), firms, companies, and other entities during the previous year, as assessed in the assessment year. The authority to tax income is derived from the Income-tax Act, 1961.

2. Scope of Total Income: The total income is computed based on the residential status of the taxpayer. It includes income from all sources such as:

   • Salaries (Section 15-17)
   • Income from House Property (Section 22-27)
   • Profits and Gains of Business or Profession (Section 28-44)
   • Capital Gains (Section 45-55)
   • Income from Other Sources (Section 56-59)

3. Residential Status: The tax liability depends on the taxpayer’s residential status. A person may be classified as:

   • Resident
   • Non-resident
   • Resident but Not Ordinarily Resident (RNOR)

   The determination of residential status is governed by Section 6 of the Income-tax Act.

4. Tax Rates: The tax rate applicable depends on the nature of the taxpayer (individual, company, etc.) and the level of income. Progressive tax rates are applied for individuals, and different tax slabs exist.

5. Deductions and Exemptions: Various deductions and exemptions are provided under the law to reduce the taxable income, such as:

   • Section 80C: Deduction for specified investments (e.g., provident funds, insurance, etc.)
   • Section 80D: Deduction for health insurance premiums
   • Section 10: Exemptions for specific income categories (e.g., agricultural income, certain allowances, etc.)