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Income Tax in India

In India there are different types of taxes; Direct Taxes and Indirect Taxes. Direct Taxes are the one which we pay on our income directly to the government. Indirect Taxes are charges imposed on expenditure, consumption, rights or privileges excluding income and property. Central Government and State Government are authorised to levy taxes in India.

Income Tax Department

Income Tax Department functions under the Revenue Department and administers direct tax legislations passed by the Parliament.

With computerization, the Directorate of Income Tax has been restructured with the objectives of enhanced revenue collection and improved services to tax payers. The Department now provides various online services including e-filing of returns and online payment of tax.

Central Board of Direct Taxes (CBDT)

The Central Board of Revenue has been constituted by the Central Board of Revenue Act, 1924 which deals with the matters of direct and indirect taxes. With the broadening of the spectrum of taxes the Board has been divided into Central Board of Direct Taxes and Central Board of Excise and Customs (CBEC).

Administration of direct taxes via Income Tax Department is carried out by CBDT which also focuses on planning and essential inputs for policy on direct taxes. It comprises of a chairman and other 6 members and are selected through Indian Revenue Services. The chairman is ranked as Special Secretary to Government of India. The various functions of the Chairman include appointment of senior authorities, administrative planning, implementation of cabinet decisions, handling public grievances etc.

Income Tax Act, 1961

The Income Tax Act, 1961 provides for the computation of income from various sources, deductions, set-off, refunds and relief to assesses. The Act under Chapter XII provides for the various income tax authorities, their jurisdiction and powers.

The income tax officers and other authorities appointed under the Act have various powers mentioned under Chapter XIII C (Ss. 131-136) regarding discovery, production of evidence, search and seizure. They also have the power to requisition books of account, call for information, conduct surveys etc. The procedure for assessment is provided for in Chapters XIV, XIV A, XIV B.

The Act provides for the collection and recovery of tax under Chapter XVII. The Part B of Chapter XVII also provides for deduction of tax at source. Part C of the Chapter XVII provides for advance payment of tax. The collection and recovery is provided for in Part D. The interest chargeable for default in furnishing return of income, advance tax etc. is provided for in Ss. 234 A to 234 D.

Under the Act, a special provision for settlement of cases has been provided for in Chapter XIX A. Similarly an Authority for Advance Ruling has been created under Chapter XIX B (Ss. 245 N to 245 V).

The procedure for challenging various orders of assessment etc. are well laid out under the Act. Appeals from orders of an assessing officer lie to the Commissioner of Appeals. An appeal against the order of Commissioner lies to the Income Tax Appellate Tribunal (ITAT). Against the orders of IATA, the assessee has the right to appeal to the High Court in certain cases under Section 260 A and in appeal there from can in some cases lie to the Supreme Court under Section 261.

In certain cases the Commissioner of Income Tax can call for record of any case if it considers any order passed by assessing officers against the interest of revenue. Such a revision is provided for in Section 263. In all other cases revision lies to the Commissioner in Section 264.

Chapter XXI and XXII provide for the penalties, offences and prosecutions under the Act. The rates of tax are generally provided for in the Finance Act and budget passed every year.

The National Tax Tribunal Act, 2005 provides for establishment of National Tax Tribunal and appeals to the same.

We have provided links to the website of the Income Tax Department, link to the e-filing page of the Income Tax Department, link to important legislations and the International Taxation including DTAA.

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