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| Income-tax Act, 1961 | |
|---|---|
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| Parliament of India | |
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| Citation | Act 43 of 1961 |
| Enacted by | Parliament of India |
| Commenced | 1 April 1962 |
| Status: In force (amended) | |
TheIncome-tax Act, 1961 was the charging statute ofincome tax in India. It provides for the levy, administration, collection, and recovery of income tax.[1]
TheIncome-tax Act, 2025 replaced Income-tax Act, 1961.[2]
The Government of India presents the finance bill (budget) every year in the month of February. The finance budget brings various amendments in the Income Tax Act, 1961 including tax slabs rates.[3] The amendments are generally applicable to the following financial year beginning from 1 April unless otherwise specified. Such amendments become part of theIncome Tax Act after receiving approval of the President of India.
The partial budget presented for a non-full financial year, typically during a General Election year in India, is called a "Vote on Account." It is introduced to ensure the continuation of essential government expenditures required for the smooth functioning of the country. A full-fledged budget is presented once a new government is formed.
The scope of total income is contingent on the category of thetaxpayer and their residential status in India. For example, a person resident in India is liable to pay income tax in India on his total world income. On the other hand, a person non-resident in India is liable to pay tax in India only on his Indian income. Under the Income Tax Act, there are five heads of income: salary, house property, business or profession, capital gains, and other sources. Total income consists of income computed under these heads. The tax on total income is computed as per the tax rates specified for the year during which the income is earned.
The Union Government established a panel, led by Arbind Modi, to overhaul and simplify the income tax laws. On 22 November 2017, the government formed a task force to draft a new direct tax law, replacing the existing Income Tax Act, which has been in effect since 1961. Arbind Modi, a member of theCentral Board of Direct Taxes (CBDT), will lead the six-member panel, withChief Economic AdvisorArvind Subramanian serving as a permanent special invitee.[4]