Income tax is the direct tax paid by individuals to the Central Government of India. It is imposed on income to generate government revenue and plays a vital role in economic growth and stability.
Income Tax in modern India began in 1860 when the first Income Tax Act was implemented. After five years the second Income Tax Act came into existence with major changes to the first act including the new concept of Agriculture Income.
After 1865 additional acts were implemented, the most significant being the Income Tax Act of 1961. According to this act, any person whose salary from any source of income exceeds the maximum limit of unchargeable amount is liable for Income Tax. There is also a provision of deduction and exemptions in Income Tax which depends on the:
- Type of assessee
- Source of income
- Residential status
- Investment in saving schemes