INTRODUCTION
The concept of income tax has been prevalent in India for many years. But it was James Wilson, the first British finance member, who introduced the modern Income Tax Act in 1860. Although many taxation laws have been introduced even after that, the one that has stood the test of time is the Income Tax Act, 1961.
This act is a comprehensive set of laws that oversees various tax rules and regulations in the country. It ensures that taxes are timely and correctly collected, collected, administered and recovered for the Government of India every year and was introduced in 1961.
The Income Tax Act, 1961 has 23 Chapters and 298 Sections as mentioned on the official website of the Income Tax Department. These different sections deal with different tax aspects in the country.
Every year in February, the Government of India introduces some changes in the Income Tax Act 1961 to make it relevant to the current era. Includes changes to tax tables wherever applicable.
OBJECTIVES OF THE ACT
Development of the economy
One of the main objectives of this law is the economic growth or economic development of the country. The economic growth or economic development of a country is directly proportional to the growth of the country’s capital formation. To overcome the lack of capital, the government introduced the Income Tax Act of 1961, which mobilized the country’s resources so that rapid capital accumulation could take place. Introducing new taxes or increasing taxes will help in the process of capital formation smoothly.
Full employment
The second objective of the Income Tax Act, 1961 is employment. The country’s employment rate depends on the actual demand for skilled professionals and the supply of well-paid jobs. To do this, tax rates need to be reduced to achieve the goal of full employment. In return, the demand for goods and services will be higher, leading to capital formation in the country, as both employment and income will be created through the multiplier mechanism.
Price stability
The importance of stable prices is high. With the implementation of the Income Tax Act, 1961, ensuring price stability is easier, even if it is a short-term objective of taxation. Under this law, the authorities made it easier to control price inflation. With the increase in direct taxes came a check on private spending. This reduces the pressure on the commodity market. However, if prices fall during deflation, the opposite effects can occur on the market and growth.
Reduction of BOP difficulties
Taxes like duties are also levied under the Income Tax Act 1961 to control the import of certain goods. It is also carried out with the aim of reducing the balanced intensity of payment difficulties and encouraging domestic production of import substitutes.
FEATURES
Income tax is a type of direct tax that the taxpayer has to pay himself. This tax liability cannot be transferred to another person.
The central government of India controls the income tax.
It applies to the taxpayer’s income achieved in the previous year.
The tax is calculated based on the applicable flat rate.
This type of tax is a progressive tax, where the rates are set so that the rich pay more tax.
Deductions are also available for different types of income subject to a maximum limit in a given financial year.
Conclusion: The Income Tax Act 1961 stands as a cornerstone of India’s fiscal policy, with its objectives ranging from fostering economic growth and ensuring full employment to maintaining price stability and addressing balance of payments challenges. Its features, including progressive taxation and deductions, underscore its commitment to equitable tax collection and sustainable economic development.
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