Income Tax: - Manntript Kaur
Income Tax: - Manntript Kaur
-MANNTRIPT KAUR
INTRODUCTION
Tax is the compulsory financial charge levy by the government on
income, commodity, services, activities or transaction. The word ‘tax’
derived from the Latin word ‘Taxo’. Taxes are the basic source of revenue
for the government, which are utilized for the welfare of the people of
the country through government policies, provisions and practices.
In India, Income Tax was first time introduced in the year 1860 by Sir
James Wilson in order to meet the loss caused on account of ‘military
mutiny’ in 1857.
In the year 1886, a separate Income Tax Act was passed, this act was in
force for a long time, subject to the various amendments from time to
time. In the year 1918, a new Income Tax Act was passed, but again, it
was replaced by another new act of 1992. The Act of 1922 became very
complicated due to various amendments. This act remains in force to the
assessment year 1961-62. In the year 1956, the Government of India
referred to the Law Commission in order to simplify the law and also to
prevent the evasion of Tax.
Income Tax Act, 1961: The Act contains the major provisions
related to Income Tax in India.
events affecting certain classes of cases and a central charge was created at
Bombay.
the 1940
department: 1943
1947
• Business Profits Tax enacted (for the period 1-4-1946 to 31-3-1949).
1951
• Report of Income-tax Investigation Commission known as Vardhachari
Commission received.
• Voluntary Disclosure Scheme introduced.
1952
Internal Audit Scheme in the Income-tax LI>The Gift-tax Act, 1958 introduced w.e.f.
Department introduced. 1-4-1958.
Taxation Enquiry Commission known as Report of Law Commission received.
John Mathai Commission set up.
1959
• Direct Taxes Administration Enquiry Committee submitted its report.
1960
• Directorate of Inspection (Research, Statistics & Publications)was set up.
• Two grades of Inspectors - selection and ordinary grades - merged into one single grade.
1961
• Direct Taxes Advisory Committee set up - Direct Taxes Administrative Enquiry Committee constituted.
• Income-tax Act, 1961 came into existence w.e.f. 1-4-1962.
• Revenue Audit introduced for the first time in the Department.
• New system for evaluation of work done by Income-tax Officers introduced.
1963, 1964
Central Board of Revenue bifurcated and a separate Board for Direct Taxes known as
Central Board of Direct Taxes (CBDT)constituted under the Central Board of
Revenue Act Functional Scheme introduced.
• For the first time an officer from the department became Chairman of the Special Recovery Unit created.
CBDT w.e.f. 1-1-1964.
• The Companies (Profits) Sur -tax Act, 1964 was introduced. Intelligence Wing created and placed under the charge of
• Annuity Deposit Scheme, 1964 introduced. Directorate of Inspection (Investigation).
1963 1966
1965
1969
1970
• The posts of Addl. Commissioner of Income-tax created and abolished after one year.
• Recovery functions which were hitherto performed by Income- tax Officers, given to
Tax Recovery Officers. Prior to that State Government officials exercised the functions
of a Tax Recovery Officer.
1971
• A new cadre of posts known as Tax Recovery Commissioners introduced w.e.f. 1.1.1972.
• Report of Direct Taxes Enquiry Committee received.
• Summary Assessment Scheme introduced w.e.f. 1-4-1971.
1972
• A Special Cell within the Directorate of Inspection (Investigation) created to oversee the cases of big industrial houses.
• A new cadre of posts known as IAC(Acq.) created and IAC appointed as Competent Authority with the insertion of new Chapter XXA in
the Income Tax Act, 1961 on the acquisition of immovable properties in certain cases of transfer to counter evasion of tax.
• Directorate of Organisation & Management Services (Income- tax) created.
• The post of I.T.O. (Internal Audit) created.
• Bradma Scheme in the Income-tax Department introduced.
• System of Permanent Account Number introduced.
• Valuation Officers given statutory powers under the Income-tax Act, 1961 and Wealth-tax Act, 1957.
1974
1975
1977
• A new cadre of posts known as IAC (Assessment) created.
1978
• Appellate functions given to a new cadre of Commissioners known as
Commissioner (Appeals).
• Directorate of Inspection (Recovery) set up.
• A new directorate known as Directorate of Inspection (Vigilance) came into
existence by bifurcating the functions of Directorate of Inspection
(Investigation).
• Chokshi Committee submitted its final report.
1979
• A new directorate designated as Directorate of Inspection (Publication & Public Relations) created out of the Directorate of Inspection (RS&P).
1980
• Hotel Receipt Tax Act, 1980 came into force w.e.f. 1.4.1981.
1981
• Economic Administrative Reforms Commission set up.
• Three new Directorates viz. Directorate of Inspection (Intelligence), Directorate of Inspection (Survey) and Directorate of Inspection (Systems) created.
• Within the Directorate of Inspection (Income Tax and Audit), a separate Director of Inspection (Audit) appointed.
• Directorate of Inspection (RS&P) re-organised and Directorate of Inspection (P&PR) re-designated as Directorate of Inspection (Printing & Publications).
• I.R.S.(DT) Staff College, Nagpur, re-designated as National Academy of Direct Taxes.
• Special Bearer Bonds (Immunities & Exemptions) Act promulgated.
• Director General (Special Investigation) and Director General (Investigation) appointed to control the functioning of various Directorates under the control of
Central Board of Direct Taxes.
• Five posts of Chief Commissioner (Administration) created.
• A few posts of Commissioner of Income-tax were earmarked as Commissioner of Income-tax (Inv.) and Commissioner of Income- tax (Recovery).
1982
• Special Cell within the Directorate of Inspection (Investigation) converted into a separate Directorate
and re-designated as Directorate of Inspection (Special Investigation).
• DIT (Systems) appointed in the Directorate of Income-tax (Organisation and Management Services) to
coordinate efforts in introducing electronic data processing in the IT Deptt. A microprocessor based EDP
system along with data entry system was installed heralding the era of computerisation.
• Levy of Hotel Receipts Tax discontinued.
• Regional Training Institute at Nagpur started functioning under the control of the National Academy of
Direct Taxes.
1983
• The vigilance set up reorganised and the strength of Dy. Director (Vigilance) and Asstt.
Director(Vigilance) augmented.
• Computerised systems for processing challans and PAN designed and developed.
1984
• Taxation Laws(Amendment) Act 1984 passed to streamline procedures in the interest of better work
management; avoid inconvenience to tax payers; reduce litigation; remove anomalies and rationalise
some provisions.
1985
• Post of Director General (Investigation) created for more effective checking of tax evasion.
• E.D.(Amendment) Act 1985 discontinues levy of estate duty on deaths occurring on or after
16.03.1985.
• Compulsory Deposit Scheme (Income Tax Payers) Act 1974 discontinued w.e.f. 1.4.1985.
• Interest Tax Act, 1974 discontinued w.e.f. 31.3.1985
• A new "Reward Scheme" for motivating officers introduced w.e.f. 1.4.1985.
1986
• The I.T. Act and W.T. Act amended by Taxation Laws (Amendment and Miscellaneous Provisions) Act :-
• Established Settlement Commission.
• Introduced Block assets concept for depreciation.
• Four offices of Appropriate Authority for acquiring property in which unaccounted money is invested
set up in metropolitan cities.
1987
• Director of Inspection
• Insp. Asstt. Commissioner of I.Tax
• Appellate. Asstt. Commissioner
• Income tax Officer Gr. A
• Income tax Officer Gr. B
• Director of Income Tax
• Dy. Commissioner of Income Tax.
• -Do- (Appeals)
• Asstt. Commissioner of I.Tax
• Income tax Officer
• Expenditure Tax Act 1987 brought into force.
1988
• Creation of an attached office of DGIT(Management Systems) to supervise Directorate of I.Tax(Research, Statistics, Publication &
Public Relations) and Directorate of I.Tax (Organisation and Management Services) from Sept. 1989.
1990
1991
1992
• Rs. 1400 Presumptive Taxation scheme introduced as a measure to widen tax base.
• The post of Director General of Income-tax (Management Systems) was abolished.
1993
1994
1995
1996
1998
• Furnishing details of bank account and credit cards in the prescribed form made mandatory for refund purpose.
• Prima-facie adjustments to return done away with; acknowledgments to serve as intimations.
• Samman Scheme introduced in 1999 to honour deserving tax payers.
2000
• The process of implementation of restructuring of the Department commenced to increase efficiency and to deal with increased
workload.
• Total sanctioned work force reduced from 61,031 to 58,315.
• Certain rationalisation measures at structural levels introduced.
• Interest-tax Act terminated with effect from 1-4-2000.
2001
• The restructuring of the Department resulted in reducing the stagnation at all levels and large number of personnel were
promoted in various grades.
• Jurisdiction pattern was revamped.
• New posts were created at the level of DGIT/DIT in the areas of Research, International Taxation and Infrastructure.
2002
2003
• The National Website of the Department (www.incometaxindia.gov.in) won the Silver Medal in the category of the 'Government
Websites'under the National e-Governance Awards.
2004
• As a measure of widening of tax base, the concept of AIR (Annual Information Return) was introduced.
• Fringe Benefit Tax (FBT) was introduced as a major step towards widening of tax base and bolstering of the Direct Tax Collection.
• Securities Transaction Tax (STT) was introduced.
2005
2006
• A project for enabling electronic filing (e-filing) of Income Tax Returns was launched.
• Tax Return Preparer Scheme (TRPS) was launched to assist individuals and HUF taxpayers to file their Return of Income.
• The institution of Income Tax Ombudsman set up in 12 cities throughout the country to look into tax related grievances of the common public.
2007
• The Refund Banker Scheme was launched in Delhi and Patna charges.
• Sevottam Scheme was launchedto standardize service delivery to the taxpayers.
• The first citizen-friendly single window Aayakar Seva Kendra (ASK)was setup,for centralized receipt and registration of specified categories of
documents, including income tax returns.
• The Income Tax Department became the biggest revenue mobiliser for the Government in 2007-08, with its share increasing from 34.76%in 1997-98 to
52.75%in 2007-08.
• All India Tax Network (TAXNET) was setup connecting more than 700 offices in more than 500 cities. Consolidation of 36 (RCC) independent regional
databases into a single centralized database (PDC or Primary Data Centre) was carried out.
• Integrated Taxpayer Data Management System (ITDMS) for drawing of 360° taxpayer profile was launched.
2008
• Cyber Forensic Labs were setup to identify relevant digital data during search and survey operations, recover hidden or password
protected or deleted data and store retrieved data in a manner so that it could be used as evidence in judicial proceedings.
• Electronic filing of Income Tax Returns Project was awarded Silver Award in the category "Outstanding Performance in Citizen
Centric Service Delivery" under the National e-Governance Awardsfor the year 2007-08.
2009
• Centralized Processing Centre was setup in Bengaluru for bulk processing of e-filed and paper returns. The Centre operates
without any interface with taxpayers in a jurisdiction – free manner.
2010
• Integrated Tax Payer Data Management System (ITDMS) was conferred the Prime Minister's Award for 'Excellence in Governance
and Administration'.
• CPC Bengaluru awarded the Gold Award for 'Excellence in Government Process Re-engineering' under the National e-
Governance Awards for the year 2010-2011.
• To simplify the 50 years old Income-tax Act, 1961,'The Direct Taxes Code Bill, 2010' was introduced in the Parliament.
2011
• Foreign Tax Division of CBDT was strengthened to effectively handle the increase in tax information
exchangeand transfer pricing issues.
• Various IT initiatives were taken for efficient tax administration. These include e-filing and e-payment of
taxes, adoption of 'Sevottam' concept by CBEC and CBDT, web based facility for tax payers to track the
resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
• A new simplified form 'Sugam' was introduced to reduce the compliance burden of small tax payers
falling within presumptive taxation.
2012
• Senior Citizens (not having any income from business/profession), were exempted from payment of
advance tax.
• TRACES (TDS Reconciliation, Accounting and Correction Enabling System) launched to serve an
integrated one-stop platform for the stakeholders to facilitate the services related to TDS operations.
2013
• The Government approved the Cadre restructuring of the Department for the creation
of 20,751 additional posts and for carrying out various measures to increase the
effectiveness of the Department.
• Briefly, the salient features of the approved restructuring are as under:
a. Number of assessment units (AUs) increased by 1080 from 3420 to 4500, for
strengthening the tax-administration;
b. Each Range to have one more Assessing Officer;
c. Increase in the number` of Administrative CsIT deployed on assessment
related functions to increase from 228 to 250;
d. 114 Special Ranges to be created, with adequate supporting manpower;
e. Creation of reserves numbering 620 created in the IRS cadre;
f. Bifurcation of the posts of the CITs in the HAG and SAG scales, on functional
basis;
g. Upgradation of all existing 116 posts of CCsIT in HAG+ and Apex scales along
with an increase of their number by 1 post;
h. Strengthening of the training set-up with creation of three more RTIs;
i. Strengthening the Appellate/Advocacy Structure by increasing the number of
CIT Appeals and providing them supporting manpower. Advocacy structure in
the ITAT to be strengthened.
2014
• New National Website of the Income Tax
Department www.incometaxindia.gov.in
launched with enhanced new features and
content.
• SIT to investigate Black Money in Swiss Bank
Accounts formed
• Tax Administrative Reforms Commission
(TARC) headed by Dr. Parthasarathi Shome
submitted its report of reviewing the
applicability of tax policies and tax laws in the
context of global best practices and
recommending measures for reforms required
in tax administration to enhance its
effectiveness and efficiency.
TYPES OF
Taxes are levied by the government on the
taxpayer. Taxes are broadly divided into two parts
namely, Direct Tax and Indirect Tax. Direct Tax is
TAXES levied directly on the income of the person.
Income Tax and Wealth Tax are the part of Direct
Tax. Whereas, in indirect taxes, the person who
pays the tax, shifts the burden to the person who
consumes the goods or services. Before 2017 the
Indirect Tax comprises of various taxes and duties
like Service Tax, Sales Tax, Value Added Tax,
Customs Duty, Excise Duty and etc. From July 1st,
2017 all such Indirect Taxes are submerged in one
tax law which was named as ‘The Goods and
Services Tax Act, 2017”.
Income is known as a regular periodic return
to a person from his activities. However, the
NT
RECIEPT Income arises either on receipt basis or accrual
basis. It may accrue to a taxpayer without its
OR actual receipt. The income in some cases is
ACCRUAL deemed to accrue or arise to a person without its
actual accrual or receipt. Income accrues where
BASIS the right to receive arises.
Gifts up to Rs. 50,000 received in Cash do not
constitute tax liability. Gifts in kind having the fair
value maximum up to Rs. 50,000 is not liable to
GIFTS tax. However, the whole amount will be taxed if
the value exceeds the prescribed limit. Moreover,
the treatment of valuation of the gift is different
in the different situation especially gifts received
on occasion of marriage.
Income Tax does not make any distinction
in computing income, whether it receive
LUMPSUM in lump sum or instalment.
OR
INSTALLME
NTS Moreover, the income is defined in
Section 2(24) of the Act.
IMPORTANT
TERMS
Income tax is levied on the total
income of the previous year of
every person. In general terms,
ii. a Hindu undivided family
Person the meaning of a person can be i. an individual,
(HUF),
interpreted in a short term.
Whereas, as per Section 2
(31), Person includes:
v. an association of persons
(AOP) or a body of individuals
iii. a company, iv. a firm, vi. a local authority, and
(BOI), whether incorporated or
not,
Income earned during the year is taxable in the next year. The definition of “Previous Year” is given under
section 3 of the Act. Previous Year is the year in which income is earned. Previous year is the financial year
immediately preceding the relevant assessment year. From 1989-90 onwards, every taxpayer is obliged to
follow financial year (i.e., April 1st of one year to March 31st of next year) as the previous year.
For a newly set up business or profession, the first previous year will start from the day from which that
business or profession has commenced, but the period of ending will remains same (i.e., 31st March).
Heads of Income
Capital Gains