In India Income Tax is the most prominent, and significant Direct Tax collected by the Central Government. Income Tax is levied on Total Income of the previous year of Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), Firms, Companies etc., annually at once. And there are different Slab Rates are proposed by the Financed Minister every year in the form Finance Bill in the Parliament. Part of the Income Tax has to be paid off by the Assessees in advance based on an estimated Total Income. In India a separate Law called Income Tax Law is formulated by the Indian Government. In practice we don’t hear Income Tax Law but it is operated in one of the instruments, through which the Income Tax Law is operated. In order to frame, formulate, impose and regulate the Income Tax related issues the Income Tax Law make use of 5 instruments related to the Tax, where are discussed below in brief.
Income Tax Act, 1961
This is foremost and premier instrument used by the Government to levy the Income Tax in India. It was came into force on 1st April 1962, and contains 298 Section and XIV Schedules (14). Every year, Finance Bill passed by the Parliament of India will amend this Act with additions and deletions.
The Finance Act
The Finance Minister of Government will present the Finance Budget in the Parliament every year. And the budget will consist of part A and part B. In Part A the Finance Minister will present the proposed Financial Policies of the Government where as in the Part B he speaks about the Tax proposals to be taken for the next Fiscal Year. After the speeches if the Parliament feels it as not approvable then it suggests for the improvements, but in final it has to approve the Budget. After that it has to get assent from the President of India.
Income Tax Rules, 1962
The Central Board of Direct Taxes (CBDT) will administer the Direct Tax, and it is empowered to formulate the mandatory rules for carrying out the requirements of the Income Tax Act, 1961. It frames rules from time to time and these rules are collectively called as Income Tax Rules, 1962.
Circulars and Notifications
In order to justify problem and clear the doubts arise in the scope of Income Tax provisions, the CBDT has issued Circulars and Notifications as guidelines to the officers and/or assessees. The Department has to work within the bounds of Circulars and Notification but there are not mandatory for the assessees to be bound by them.
During the course of Income Tax Act implementation by the CBDT, there are changes for arising issues and problems between the department and assessees. Then these have to be solved and this solving power has been given to the judiciary. The judiciary will hear the disputes arise in the course of Income Tax levy and justify with proper solutions. And the judgments will also be used in the future for such disputes. Judgment given by the Supreme Court of India is ultimate law throughout India and decisions given the High Courts are applicable in the respective states only.