Income Tax Act
Income Tax is the tax that an individual pays to the government of India as per their income. Broadly categorised into two types, the income tax is used by the Indian government directly for the welfare of its citizens. In 1961, the government of India also introduced the Income Tax Act so that everything related to taxation is listed in one place. So, let us understand all about the Income Tax Act.
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What is the Income Tax Act?
The Income Tax Act was introduced in 1961, with a motto to consolidate everything related to taxation under one roof. There are different sections enlisted under the Income Tax Act and the Finance Ministry during the time of Budget is allowed to make amendments to the existing sections. Listed below are the different sections under the Income Tax Act of 1961, that you should know about.
Different sections under the Income Tax Act
There are different sections which are also known as chapters and are enlisted in the Income Tax Act, of 1961. So, let us walk through the different sections of the Income Tax Act:
- Chapter 1: As the first section of the Income Tax Act, this aims to introduce Income Tax to individuals. It is basically the introduction of the Income Tax Act.
- Chapter 2: In this section, you will get to know the extent and commencement of the Income Tax Act.
- Chapter 3: Under this chapter, you can understand the dividend income and income that is arising due to work commitments abroad. It also deals with the income tax charge and the total income scope.
- Chapter 4: This section deals with all the income that is not considered a part of the total income. This type of income includes income generated from the property, trusts, political parties, etc.
- Chapter 5: This talks about the income of other individuals that are however a part of the assessee’s income. This income is from capital gains, business, house property, etc.
- Chapter 6: This section deals with the transfer of income, where the assets are not transferred. These include transfer and revocable transfer.
- Chapter 7: This talks about the deductions that are applicable to some specific income and payments.
- Chapter 8: This section deals with the shares and rebates of any individual in an organisation.
- Chapter 9: This section deals with income tax relief and rebate that is applicable to it.
- Chapter 10: This talks about the agreement done with foreign countries with which there are no agreements on tax payments.
- Chapter 11: This talks about the anti-avoidance rules relating to Income Tax.
- Chapter 12: This refers to tax calculations under some specific cases.
- Chapter 12A: This deals with the income generated by the Non Residents of India or NRIs. This includes capital gains, short-term capital gains, etc.
- Chapter 12B: This talks about the special tax provisions that are provided to specific companies.
- Chapter 12BB: This deals with the taxation process for a foreign organization to an Indian subsidiary.
- Chapter 12D: Under this chapter, the taxation process for taxation of the profits earned by domestic companies.
- Chapter 12DA: This deals with the distributed income of any company.
- Chapter 12E: This talks about the tax of over unitholder’s distributed earnings.
- Chapter 12F: This talks about the income earned through venture capital funds.
- Chapter 12G: This talks about the tax related to shipping companies,
- Chapter 13: This deals with all the details about authorities of income tax such as their appointment, power, etc.
- Chapter 14: From the process of filing returns to the process of obtaining PAN, everything is listed under this chapter.
- Chapter 14A: Under this chapter, one can find provisions for repetitive appeals that are still pending in the Supreme Court or High Court.
- Chapter 15: This enlists the tax liabilities of both NRIs and private companies.
- Chapter 16: This deals with the taxation process of firms as well as their assessment.
- Chapter 17: This is in dealing with the recovery of late taxes and how the late tax is recovered.
- Chapter 18: This is income tax relief that is provided to certain organizations as they pay dividends to their shareholders.
- Chapter 19: This talks about the refund in case more tax is paid out to the Income Tax.
- Chapter 19A: This deals with the settlement of cases pertaining to application procedure, sum recovery, etc is talked about.
- Chapter 19B: This talks about the advance rulings, power of authority, etc.
- Chapter 20: This deals with any appeal made to commissioners and deputy commissioners or appeals made at High Court.
- Chapter 20A: This section deals with the acquisition of different certain immovable properties.
- Chapter 20B: This deals with when individuals need to pay a certain amount in case of tax evasions.
- Chapter 20C: It oversees the purchase of immovable properties by the central government in the case of a transfer of ownership.
- Chapter 21: This chapter deals with the different penalties that are laid out during instances when there is non-tax payment or other instances.
- Chapter 22: This chapter deals with the offenses and processes in regard to compliance failures.
- Chapter 23: This enlists some special cases for taxation of different tax-paying entities.
Important terms under Income Tax Act
Listed are the important terms under the Income Tax Act that you should know about:
- Assesse: This refers to individuals who are liable to pay taxes to the Indian government and even those against whom certain proceedings have been initiated.
- Assessment year: This indicates the year in which the assesse’s income is being taxed and assessed. For example, the assessment year will be 2021-2022 and the income calculated will be from 1st April 2020 to 31st March 2021.
- Assessment: This is the process to determine the accuracy of the income declared by an individual as well as the total tax liability of that individual.
Deductions under the Income Tax Act
As specified in the Income Tax Act of 1961, there are certain deductions applicable such as the following:
- Section 80C: Under this individuals can get tax exemptions of up to Rs. 1,50,000. The available investment options under this section are life insurance plans, ELSS, etc.
- Section 80D: This allows deductions on health insurance premiums and medical expenses.
- Section 80CCD: This allows deductions if contributions are made towards the National Pension Scheme. A total of Rs. 50,000 tax deduction is applicable under this.
- Section 80DD: This type of tax deduction is applicable to those who are seeking medical treatment for a disabled family member.
- Section 80TTA: This provides a maximum deduction of Rs. 10,000 if there is income generated through interests.
- Section 80DDB: This is a type of tax deduction that can be claimed if there are medical expenses incurred on certain illnesses.
- Section 80U: This is applicable for physically disabled people and lets them claim tax deductions of up to Rs. 1,00,000.
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When was the Income Tax enacted?
The Income Tax was enacted in 1961.
What are the different tax deductions available under the Income Tax Act?
You can get tax deductions under section 80C, section 80D, section 80DDB, and more.
What are some of the tax-saving investment options available under section 80C?
Some of the tax-saving investment options available under section 80C are life insurance plans, ULIPs, NPS, and more.
Who is liable to pay tax in India?
Individuals with a salary of more than 3 lakhs are liable to pay tax in India.