INCOME TAX ACT

Income Tax in India was imposed by Sir James Wilson of British Government in the year 1860, to recover from losses of 1857's revolution. Another Act was made  in this year 1886, which can be treated as permanent base for income tax system in India. This was amended several in 1863, 1867, 1871, 1873 and 1878.

In this year 1922, 'Central Revenue Boards' was established and Income Tax Act, 1922 was implemented with the help of this board. Direct Taxes Administration Enquiry Committee was appointed in the year 1958. In the year 1961, Parliament announced new Income Tax Act, which came into enforcement from April 1962. This Act was based on report submitted by Mahavir Tyagi in 1959.

Income Tax Act, 1922  

'All India Taxation Enquiry Committee' was consituted in the year 1921 to give suggestions for improvement of finance position Income Tax Act, 1922 was introduced based on the recommendation of this committee.

Salient Features of I.T. ACT, 1922:

1. To bring Income Tax and super-tax under single Act.
2. To Impose tax on the income earned in the previous year.
3. Tax rates are to be decided in Finance Act which is to be approved by parliament.
4. To establish Central Revenue Board.

Income Tax Act, 1961

Income Tax Act, 1922 was sent to review tax system by the Government of India to Law Commission in 1956. Law Commission submitted its report in the year 1958. The government also constituted a committee entitled 'Direct Taxes Administration Committee' under Chairmanship of Mahavir Tyagi in the year 1958. 

Types of Taxes   

There are basically two types of taxes, direct and indirect taxes.Direct taxes are collected by the government directly from the tax payer through levies such as income tax, wealth tax and interest tax.

Whereas indirect taxes are collected indirectly as a part of prices of goods and services on which these are levied. In our country, these comprise of excise duty, sales tax, customs duty value added tax. While direct taxes from 30 per cent of government's revenue indirect taxes contribute a large chunk of 70 per cent. Gift tax and estate duty were part of the direct tax revenue. As an on-going process of simplification and rationalization of the direct tax structure in India, the government repealed the Gift Tax Act in 1998 and the Estate Duty Act in the late eighties.

Direct Taxes: Income tax, Wealth tax, Gift tax etc.

Indirect Taxes: Excise, Customs duty, Sales tax etc.