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The direct tax which is paid by individual to the Central Government of India is known as Income Tax.

It
is imposed on our income and plays a vital role in the economic growth & stability of our country. For
years the Government is generating revenue through this tax system.

The word 'Tax' originated from the 'Taxation.' which mean 'Estimate.' Hence, 'Income Tax' mean 'Income
Estimate,' which helps the government to know the actual economic strength of a person. It is also a
way to set up an economic standard for general people. It helps the Government to know the
distribution of money among country's people.

Income Tax has been in force in different forms since years. If we go through the history of India, we get
relevant information regarding the taxation system of India. In ancient history, it is mentioned about
such system which were imposed on the income, expenditure and other subject. Even information of
the same is given in Manu Smriti and Arthasatra which confirms its existence at that time.

In modern India, Income Tax came into existence in 1860 with the implementation of first Income Tax
Act. After implementation of this Act, people became aware of the actual meaning of Income Tax. This
act was in force for first five years. After this, in 1865, second Act came into force. There were major
changes in this Act relative to the first. It proved itself as a good factor for the growth of our economy.
With this Act a new concept of Agriculture Income came into existence.

After this, different new Act was also implemented. The most important of them is the Income Tax Act,
1961. According to ruling of Income Tax Act, 1961, any person whose salary from any source of income
is more than the maximum limit of unchargeable amount will be liable to pay Income Tax. There is also a
provision of deduction and exemptions in Income Tax, depending upon the type of assessee, source of
income, residential status and investment in saving schemes. Income tax rates are a matter of change,
which is declared by Ministry of Finance, Government of India regularly, usually on annual basis.

Income Tax Department is one of the important part of Ministry of Finance, Government of
India. In 1860, it started working with the implementation of first Income Tax Act. After
implementation of this Act, people became aware of the actual meaning of Income Tax and
motto of Income Tax Department. Department followed this act for five years after which, in
1865, second act came into force. There was a major change in this act relative to first Act. With
this Act, the department started working with a new concept of Agriculture Income.

But the original story of Income Tax Department came into being in 1922 with the
implementation of Income Tax Act -1922. It showed a major change from the last act by
imposing the charge in the year of assessment on the income of last year. It also declared that tax
rates would be announced by Finance Acts.

After this, in 1956 Government revised this act and did few changes keeping the original in its
format. For its review government formed a committee. This committee made few changes and
submitted Income Tax Bill in Lok Sabha in April 1961. The then President, accepted this bill on
13th Sep, 1961. Since 1961, our government has been using this Act for running our system.
Income Tax Department of India has faced so many changes after its establishment, some of
which are as follows:-

Year of Events Events


Appellate functions became separate from inspecting functions and a class
1939
of AACs officers came into existence.
1940 Directorate of Income-tax inspection came into existence.
1941 Central charge created at Kolkata.
1943 Special Investigation Branches set up.
Directorate of Inspection - Investigation came into existence and Income-
1952
tax inspector was declared as an I.T. authority.
1953 Estate duty act implemented.
1954 Internal audit income implemented.
1963 Separate board of direct taxed formed.
1966 Functional scheme implemented.
1971 Direct taxes enquiry report was received.
1980 Hotel reciept act came into force.
1986 The I.T. act and W.T. act amended by taxation laws.
1990 Gift tax bill introduced.
1991 Interest tax act revived.
1997 Decrease in income tax rates.
2002 Computerised return system started in all over India.

An income tax is a tax levied on the income of individuals or businesses (corporations or other legal
entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can
be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is
often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the
total income of the individual (with some deductions permitted), while corporate income taxes often tax
net income (the difference between gross receipts, expenses, and additional write-offs). Various
systems define income differently, and often allow notional reductions of income (such as a reduction
based on number of children supported).

he income tax may be defined as the amount of money that is paid to the government by
individuals. The government deducts the income tax to fulfill the purpose of making the country
growing financially. By deducting the income tax, government decides the actual income of you
and according to that, the overall financial situation of the country can be decided. The direct tax
that is paid by us to the government is called the Income Tax. The Income tax plays a huge roll
in the economical growth of the country. The income tax helps the country to be economically
stable. The income tax is deducted by the government from the income of individuals.
The origin of the word „Tax‟ is „taxation‟. The meaning of the word „taxation‟ is „estimate‟.
Therefore, income tax means income estimate. It was the idea of Augustus Ceaser to apply the
tax system on all around the world. Augustus is known in the history as the first roman
employer. The popularity of the idea of the income tax was also reach in Greece, Germany and
other countries by time. The income taxes also deducted based on occupations of the people.
Income Tax and government
The income tax plays a great role in the economical growth of the country. The money, which is
needed to run the country, is paid by us to the government in the form of income tax. The
government decides the actual financial situation of the individual. By collecting income tax,
government can decide the amount of money that is circulated all over the country, people to
people. The economical strength of the country is also decided from the amount of money that is
paid to the government by the tax payers. The country runs due to the government and the
government runs due to income tax. The income tax is a way for the government to get money
for the country. The money that is collected by the income tax is used to make country more
powerful in every sector. There are many fields where government has to pay money. The
development of country is based on many features. A country is considered to be powerful if it is
having a growth in every field such as Science and Aeronautics, Army and Navy Forces, Civil
Services, Education, Information Technology, Film industry and many more.
Types of income Tax
There are various tax systems in the world. The tax systems vary country to country. The tax
system in one country may be completely different than the tax system in the other country. We
talk about the general types of tax here. Generally, there are two types of income tax.
1. Personnel tax:
The personnel tax is known as the tax deducted from the person‟s individual income. Some part
of the total income of individual is paid to the government according to the laws.
2. Corporate tax:
The corporate tax is for the industries. The total gain of company is taxable. Companies make
profit and from that money, government takes its part in the form of income tax.

The modern tax industry is growing speedily. The process of tax payment has also been
complicated. The need of the tax professionals has been there in the tax market. For the common
man, it is obviously a confusing process of the payment of tax. The choice of experienced tax
professional in the payment process is saves time and money.

INTRODUCTION
1. The Indian Income Tax Act provides for chargeability of tax
on the total income of a person on an annual basis. The quantum of
tax determined as per the statutory provisions is payable as:
a) Advance Tax
b) Self Assessment Tax
c) Tax Deducted at Source (TDS)
d) Tax Collected at Source (TCS)
e) Tax on Regular Assessment
Tax deducted at source (TDS) and Tax collection at source
(TCS), as the very names imply aim at collection of revenue at the
very source of income. It is essentially an indirect method of collecting
tax which combines the concepts of “pay as you earn” and “collect
as it is being earned.” Its significance to the government lies in the
fact that it prepones the collection of tax, ensures a regular source
of revenue, provides for a greater reach and wider base for tax. At
the same time, to the tax payer, it distributes the incidence of tax
and provides for a simple and convenient mode of payment.
The concept of TDS requires that the person on whom
responsibility has been cast, is to deduct tax at the appropriate rates,
from payments of specific nature which are being made to a specified
recipient. The deducted sum is required to be deposited to the credit
of the Central Government. The recipient from whose income tax
has been deducted at source, gets the credit of the amount deducted in his personal assessment on the
basis of the certificate issued by
the deductor.
While the statute provides for deduction of tax at source on a
variety of payments of different nature, in this booklet, an attempt is
being made to discuss various provisions of TDS on payments of nature other than salaries and of Tax
collection at source
Exemption - Exemption from this section is allowed:
i) if interest, or aggregate of interest during the financial year,
does not exceed Rs.5000/-. However where the payer is a
banking company, a cooperative society engaged in the
business of banking or a post office the exemption limit shall
be Rs. 10,000 (applicable w.e.f. 1.6.2007).
ii) Such interest income is credited or is paid to a banking company or co-operative Society engaged in
banking, or a Financial
Corporation or, LIC, or UTI, or company or cooperative society
carrying on insurance business, or any other institution,
association or body notified by the Central Government for
reasons recorded in writing.
iii) The interest is paid, or credited by, the firm to its partner’s
account.
iv) Interest income credited, or paid, by co-operative society to
its members account, or to another co-operative society.
v) Interest income on deposits under any scheme framed and
notified in Gazette by Central Government.
vi) Income credited or paid in respect of deposits other than time
deposits, such time deposits made on or after 1-7-1995, with
banking company including any bank nor banking institution
referred to in Section 51 of the Banking Regulation Act,1949.
vii) Any interest credited or paid by the Central Government under
the Income-tax Act or other allied Acts like Wealth-Tax, Estate-
Duty,Super Profits Tax, Companies (Profits) Sur-tax or
Interest Tax Act.
viii) Interest earned on deposits with;
- a primary agricultural credit society.
- a primary credit society.
- a Co-operative land mortgage bank.
- a Co-operative land development bank
- a Co-operative society engaged in banking business (other
than time deposits on or after 1-7-1995),
ix) Income credited or paid by way of interest on compensation
awarded by the Motor Accidents Claims Tribunal. However,
the aggregate amount of income paid/credited should not exceed fifty thousand rupees.
x) Income paid/payable by infrastructure capital company /fund
or public sector company in relation to zero coupon bond issued
after1.6.05.

 Income Tax Act, 1961 (Introduction & Basic Concepts)

 Passed in September 1961,

 Came into operation w.e.f. 01.04.1962,

 Extends to whole of India.

 Rate of IT are given in the “Finance Act”, passed by the parliament every year.

o  Income Tax is a Direct Tax.

o In case of direct tax, the burden and incidence are on the same person who pays
the tax, but in the case of indirect tax, the burden is on one and the incidence on
another.

o It is levied & collected by the Central Govt.

 Tax on “Income”

 Income is defined u/s 2(24) of the Act.

 It is inclusive in nature, i.e., apart from items listed in the definition, any receipt which
satisfies the basic condition of being income is also to be treated as income.

 Income broadly includes:

 Profits & Gains from Business and Profession

 Salary Income

 Dividend Income

 Winnings from lotteries, crossword puzzles, races, games, gambling or betting.

 “Income” (Contd..)

 Capital Gains,

 Amount recd. under a Keyman Insurance Policy,


 Voluntary Contributions recd. by a religious or charitable trust or scientific research
association or a sports promotion association,

 Allowances given to the assessee by his employee,

 Gift recd. by individual & HUF, in excess of Rs.25000 on or after 01.09.2004.

 ASSESSEE

 One who is assessed or is liable to pay tax.

 According to sec. 2(7) assessee means & includes:

 A person by whom any tax or any other sum is payable.

 A person in respect of whom any proceeding under the Act is taken.

 Every person :

 who is assessable in respect of income or loss of another person, or

 who is deemed to be an assessee, or

 who is deemed to be assessee in default.

 PERSON : Sec. 2(31)

 Individual

 HUF

 Company

 Firm

 AOP/BOI

 Local Authority

 Any artificial juridical person not falling under any of the above category.

 Previous Yr. & Assessment Yr.

 PREVIOUS YEAR (P.Y.)


 The yr. in which is income is earned is earned is known as Previous Year (P.Y.) and it is
taxed in the next year called Assessment year (A.Y.).

 Section 3: Fin. Yr. preceding the Assessment Year.

 Before AY:1989-90 the assessees used to maintain their previous year by will, e.g.,
Calender Year, Diwali Year, etc.

 In case of a newly set up business/profession or a source of income newly coming into


existence during a Fin. Yr. the the previous year shall be the period beginning with the
date of such setting up or such source coming into existence and ending with the said
financial year, i.e., the immediately following March 31 st .

 Computation of Income

 1.) Income from Salary XXXX

 2.) Income from House Property XXX

 3.) Income from Business/Profession XX

 4.) Income from Capital Gains X

 5.) Income from Other Sources XXXXX

 GROSS TOTAL INCOME (Sec. 14) XXXX

 Less:Deductions u/chap-VI-A (Sec.80CCC to 80U) XXX

 TOTAL INCOME [Sec.2(45)] XXXX

 Tax Due XXX

 Less:Rebates and Reliefs u/Chap-VIII XX

 Tax Payable XXXX

 Exceptions to the Rule of P.Y.

 Income of person leaving India permanently or for a long period of time,

 Income of person trying to alienate his assets with an intention to avoid tax,

 Income of a discontinued business,

 Income of non-resident shipping companies having no representative in India.


 These incomes are taxed as the incomes of the assessment year immediately preceding
the normal assessment year at the rates applicable to the former.

 ASSESSMENT YEAR: Period of 12 months commencing on 1 st Apr. every yr. It is the


fin. Yr. immediately succeeding the previous year.

 Submission of Returns & Assessment

 Submission of Return

 Following persons are required to file their returns in prescribed form and in prescribed
manner:

 Company from AY:2001-02,

 Firm (From AY:2006-07),

 Persons whose total income exceed the maximum amount not chargeable to tax,

 Persons covered under 1/6 criteria.

 Assessment

 Assessment includes re-assessment. Various kinds of assessments are covered u/chap.-


XIV.

 DEFINITION
 Tax Is a fee charged ("levied") by a government on a product,income, or activity. If tax is
 levied directly on personal orcorporate income, then it is a direct tax. If tax is levied on the price of
 a good or service, then it is called anindirect tax. The purpose of taxation is tofin an ce go ve rn me nt
 expenditure. One of the most importantuses of taxes is to finance public goods and services, such

 as street lighting and street cleaning. Sincepu blicgoo ds and services do not allow a non-payer to be

excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and

so theyneed to be provided by the government or a quasi-government agency, which tend to

finance themselves largely through taxes”


 Income is the consumption and savings opportunity gained by an entity within a
 specified time frame, which is generally expressed in monetary terms. However, for
households and individuals, "income is the sum of all the wages, salaries, profits,
interests payments, rents and other forms of earnings received... in a given period of
time." For firms, income generally refers to net-profit: what remains ofrevenue after
expenses have been subtracted. In the field of public economics, it may refer to the
accumulation of both monetary and non-monetary consumption ability, the former being
used as a proxy for total income. „
 INTRODUCTION:
 The direct tax which is paid by individual to the Central Government of India is known as Income Tax. It is
imposed on our income and plays a vital role in the economic growth & stability of our country. For years
the Government is generating revenue through this tax system.
 The word 'Tax' originated from the 'Taxation.' which mean 'Estimate.' Hence, 'Income
Tax' mean 'Income Estimate,' which helps the government to know the actual economic
strength of a person. It is also a way to set up an economic standard for general people. It
helps the Government to know the distribution of money among country's people.
 Income Tax has been in force in different forms since years. If we go through the history
of India, we get relevant information regarding the taxation system of India. In ancient
history, it is mentioned about such system which was imposed on the income,
expenditure and other subject. Even information of the same is given in Manu Smriti and
Arthasatra which confirms its existence at that time.
 In modern India, Income Tax came into existence in 1860 with the implementation of
first Income Tax Act. After implementation of this Act, people became aware of the
actual meaning of Income Tax. This act was in force for first five years. After this, in
1865, second Act came into force. There were major changes in this Act relative to the
first. It proved itself as a good factor for the growth of our economy. With this Act a new
concept of Agriculture Income came into existence.
 After this, different new Act was also implemented. The most important of them is the
Income Tax Act, 1961. According to ruling of Income Tax Act, 1961, any person whose
salary from any source of income is more than the maximum limit of unchangeable
amount will be liable to pay Income Tax. There is also a provision of deduction and
exemptions in Income Tax, depending upon the type of assessee, source of income,
residential status and investment in saving schemes. Income tax rates are a matter of
change, which is declared by Ministry of Finance, Government of India regularly, usually
on annual basis.
 Income Tax Refund
 Indian Tax payers can now heave a sigh of relief as tracking down their refund status has
become easy. The tax authorities have simplified the process of tracking your refund
cheque status. If you are a taxpayer looking for some information on your tax refund
status you can simply track the exact status of your refund online.
 INCOME TAX RETURN
 Income Tax Return is an important part of Income Tax. It is the way by which an
assessee process for paying his tax to Income Tax Department. As per the provisions of
Income Tax Act, 1961, filing of Income Tax return is a legal obligation of every
Individual whose income exceeds the maximum limit of non-taxable income for the full
financial year i.e. from 01 April to March 31 of the following year, for example for the
year 2007-2008 (which is also called the Assessment Year) the period is 01 April 2007 to
31 March 2008. In case of salaried class assessee the information about the income in the
particular financial year supported with the form 16 (the certificate for tax deducted at
source), which is issued by the employer at the end of the financial year.
 Transforming itself with the changing times, the Income Tax Department of India has
launched an easy to use online facility for filing Income Tax Returns using the Internet.
The filing of Income Tax Returns Online offers great convenience, fast in processing and
hassle-free option to the assessees. Income Tax Return has several part or phases which
we follow for paying tax. To know Income Tax Return in an easy way, it is divided into
the following sub sections:

 What Is Income Tax Return

Income Tax Return Form

Authorised Signatory

Income Tax Return Filing


 Income Tax Return
 "Income Tax Return" is a term which is often used when we talk about income tax. It is a
way by which we pay this tax. When total annual income of a person, including all
sources, is more than maximum unchargeable limitation ( At present it is Rs. 1,50,000/-)
then that person is liable to pay income tax.
 Conclusion
 Contrary to what the wealthy have taught us to believe, a strongly progressive income tax
does not take away from the economy or diminish incentive for honest work and
creativity. The strongly progressive tax rates have been in effect for approximately 70 of
the last 100 years and have served the public well. It has enhanced our freedoms and
allowed the lower classes to advance rapidly. It funded important government programs
and services which serve us all.

The claims to the contrary by the right wing have now proven themselves wrong across
the board and are substantially responsible for the economic mess we are in today. The
strongly progressive income tax coupled with the electoral reforms proposed by the
Fundamental Reform Network can entirely change the way our government and economy
work to the betterment of us all.

In a representative democracy such as ours, we can change this in one election if a


popular revolt makes it totally clear that any incumbent or candidate for office will not
receive the majority of votes cast in this fall‟s elections unless they are dedicated to
fundamentally change the way our government and economy works taking away the
stranglehold of the rich. We have to make the message clear: We know how the game is
played and we won‟t stand for it any longer. Fear tactics will no longer work on us. Join
us or be voted out of office. Serve the public as you are elected to do, or you‟re out.
Taking huge corporate campaign contributions will automatically result in our not voting
for you regardless of other promises you make or how good they sound. Our votes can‟t
be bought. We are energized by this injustice and we are all pledged to personally vote
and to turn out the votes of the 98% of us who will benefit through these changes.

Totally eliminating the ability of the ultra-rich to buy our government and economy is
what we expect of our representative. This is what we demand of our representatives.
Nothing less will do.

It only takes about 10% of the uncommitted independent vote plus a good turn out by the
Democratic base to make that happen. This is nothing compared to the approximate 5%
of the voters who identify with the extreme right. The odds are strongly on our side. And
what will energize that kind of surge in support? Nothing short of a plan to eliminate the
corrupting influence of big money in our governmental decisions through electoral
reforms and reinstating the strongly progressive income tax once and for all.

This is the change we believed Obama had promised us, but it appears he succumbed to
business as normal inside the belt way. Obama‟s Audacity of Hope brought out the
Democratic base, the independent voter and hoards of new voters especially among the
young and minorities. The pundits are already forecasting the continued decline in
popularity of Democrats in Congress and the President, and a resurgence of the right
wing in this fall‟s election. The only way that can happen is for them to successfully
blame the gridlock they caused on the Democrats. But it is not nearly enough to insure
the retention of power by the Democrats. Not at all. Not as long as they too are bought.
We have to change the way our government is run or live with the mess we have.

We need not let that happen. We must not let that happen. The Fundamental Reform
Network has a positive and achievable vision, a plan to make it happen and the means
though which we can make this effort possible. “Against a great evil, a small effort does
not result in a small result. It produces no result at all.” The choice is our. Will you join
with us to make this happen?