The Income Tax Act of India came into effect in 1961. It helps govern taxation in India. Here is a detailed rundown of the Income Tax Act of 1961.
The Income Tax Act has several chapters and sections with rules and regulations. These rules help the Indian government collect, levy, administer, and recover income tax.
You are liable to pay income tax in India to the government based on your income/ profits. The government uses this tax for various public services, infrastructure development, defense, subsidies, and other welfare purposes. However, you can reduce your tax burden using tax-saving plans.
The Income Tax Bare Act has a total of 23 chapters and 298 sections. Each of them deals with various aspects of taxation in this country.
Every year the government presents the union budget that brings certain amendments to the income tax act. Such amendments modify the income tax slabs and rates according to the needs. The modifications will come into existence only in the next financial year after the approval of the President of India.
Get an insight into the basics of the Income Tax Bare Act in the below article.
How Many Income Tax Acts Are There?
As per the 1961 Income Tax Act of India, your income comes under five categories:
- Income from salary
- Income from house property
- Income from business profit
- Income from investments/capital assets
- Income from other sources.
Based on your income type, there are chapters and sections in the income tax act. You should file your income tax returns depending on the income tax act applicable to you.
How Many Sections Are There in the Income Tax Act 1961?
The Income Tax Act 1961 has 298 sections in total. Each of these sections deals with various aspects of taxation. Every year, the union budget is formulated in India. This budget brings in several amendments to the income tax act and its sections based on the current situation of the country.
Which Is the Important Section of the Income Tax Act 1961?
The Income Tax Act of India has 298 sections in total. It is a tedious process to go through all the sections and learn their functions. However, the income tax department suggests being aware of a few sections that help you rebate and reduce your tax liability.
Five sections come under this category as the most important sections.
It is the most popular section of the Income Tax Act. It provides exemptions on your income tax up to Rs.1.5 Lakhs on various instruments. The instruments include
- Life insurance premium
- Public Provident Fund (PPF)
- National Pension System (NPS)
- Equity-linked Savings Scheme (ELSS)
- Tax-saving fixed deposit
You can invest in any of these in one go or split up among them. However, the maximum limit for this section is Rs.1.5 Lakh.
This section encourages you to invest in pension funds. Section 80CCC allows deductions for pension funds. If you invest in these funds, it helps you build a corpus during your retirement years. It also ensures you are financially independent in the golden years of your life.
If you contribute to the National Pension Scheme (NPS), you can claim a deduction under this section. The maximum deduction under Section 80CCD is
10% if you are a salaried individual (employee) or
20% of your gross income or
Rs. 1.5 lakhs, whichever is less, if you are self-employed.
As per Section 80TTA of the Income Tax Act (Chapter VI-A), you can claim deductions of up to Rs. 10,000 per annum from your interest on savings account deposits in banks, post offices, or a cooperative society.
Section 80 TTB
This section is for senior citizens above 60 years of age. Under this section, you can claim an exemption of up to Rs. 50,000 on interest income earned from
- Bank deposits
- Post office deposits
- Deposits from a cooperative society
These are the most important sections of the income tax act of India, 1961.
What Is Section 194Q Bare Act?
The Finance Act, 2021, introduces Section 194Q of the Income-tax Act. It is related to Tax Deducted at Source (TDS) on the purchase of goods and not services.
According to Section 194Q of the Income Tax Act, if you are a buyer of the goods, you are obliged to deduct the TDS of the seller of the goods. Your annual purchase value from a specific seller must be Rs.50,00,000/- or more. It indicates that if you buy items from ‘X’ and your yearly purchases exceed Rs.50,00,000/-, you should deduct TDS on purchases above the Rs.50,00,000/- limit. It came into effect on July 1, 2021.
However, section 194Q is not eligible for the below-listed people
- You started a business in the current year.
- Your gross turnover is less than Rs. 10 crores in the year before the year in which you purchased the items.
- You are a non-resident purchaser.
Thus, Section 194Q helps buyers deduct from the TDS.
What Are the Main Objectives of the Income Tax Act 1961?
As with any other act, the Income Tax Act of India also comes into existence with a few objectives. They include
- Economic Development
- Full Employment
- Stability of Price
- Control over Cyclical Fluctuations
- Reduction over Balance Of Payment difficulties
- Non-Revenue Objective
By legally paying your taxes, you help our government meet these objectives. You build a stronger nation with equality and minimum financial needs for every person in the country.
FAQ: Income Tax Bare Act
1. What is meant by Schedules to the Income Tax Act?
Schedules are various annexures that were added and amended to the Income Tax Act 1961. It includes topics and scenarios that failed to be covered previously. Various schedules have been added to the Income Tax Act at different periods, to make the IT Act more inclusive and comprehensive.
2. What is Rule 9D of the Income Tax Act?
Rule 9D deals with the calculation of taxable interest relating to contributions to a provident fund or recognised provided fund that exceeds the specified limit.
If you contribute to the provident fund more than the threshold limit of Rs.2.5 lakh or Rs. 5 lakhs, the tax on the interest gets calculated under Rule 9D. It suggests having separate accounts within the provident fund account during the previous year 2021-22 and onward for your taxable and non-taxable contributions.
3. Who is the father of income tax in India?
James Wilson, the first Finance Minister of the British Indian Government, introduced the tax system in India. He introduced the income tax in India in 1860.
4. What are the types of taxes?
Taxes are classified into Direct and Indirect Taxes in India. Direct taxes include income tax, corporate tax, wealth tax, etc.
Indirect taxes are sales tax, service tax, value-added tax, Goods and Service Tax, etc.
If you read this, you must know more about the Income Tax Act of India. The Income Tax Act of India was made for the progress of the nation. The numerous chapters and sections available in the income tax act get modified every year during the budget process to make the act more inclusive.
Render your national duty every year without fail for the development of our nation. Thus, the article covers the basic to advanced facts about the income tax act of India 1961. Contact us for more details about the income tax bare act of India.