Introduction to Income Taxation in India

Income tax is charged under the Indian Income Tax Act, 1961. It is an annual tax on income levied by the Central Government. Tax is charged in respect of the income of the financial year (known as previous year) in the next financial year (known as assessment year) at the rates fixed for such assessment year in the Finance Act passed each year by the Indian Parliament.

The Indian Income Tax Act categorises the income of a person under different heads and provides for the manner of computation of taxable income of each head. These heads of income are:-

1. Salaries
2. Income from house property,
3. Profits and gains of business or profession,
4. Capital gains, and
5. Income from other sources