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Taxes are monetary charges imposed by the government on income, goods, services, circumstances, or transactions. Tax is derived from the Latin word ‘taxo’. Taxes, the government’s primary source of money, are used to benefit the citizens of the country through laws, rules, and practises.
The Indian tax structure has changed throughout the years to accommodate the government’s expanding financial needs. The system is also intended to assist the government in realising its socioeconomic goals. Tax reform is an ongoing effort that has to be done on a regular basis to evaluate the system for updating and maintenance. Currently, the Income Tax Act of 1961 governs India (IT Act). On April 1, 1962, the present Income Tax Act became operative after being approved in 1961. The government appertained the Income Tax Act to the Law Commission in 1956, and the report was presented in 1958. The Direct Tax Administration Enquiry Commission’s Chairman, Shri Mahavir Tyagi, was chosen in 1958. Based on the recommendations of both parties, the present Income Tax Act was developed. The 1961 Act has also undergone several revisions since then.
In order to prevent tax evasion, regulate black money, and stop it from moving around, the federal government added Section 269 ST to the Income Tax Act of 1961 through the Finance Act of 2017. Since cash transactions are difficult for the government to track, the majority of transactions in India are carried out in cash (particularly real estate sales). Therefore, there is a strong desire and necessity to provide identical foods in order to limit cash transactions. There used to be food in the statute to limit cash transactions. For instance, section 40A(3assessment )’s of spending limitations on cash. Additionally, taking and repaying loans in cash is covered under sections like 269 SS and 269T.
However, before adopting section 269ST (i.e., before 1st April 2017), there was no provision in income tax involving cash bills, and this is what differentiates the existing rules from 269ST. It imposed limitations on the person receiving the money, or the payee.
Understanding the Section 269ST clause:
No person shall receive a sum of two lakh rupees or more from a person-a) in aggregate from a person in a day; or b) in respect of a single transaction; or c) in respect of transactions relating to a single event or occasion from a person, other than by account payee cheque, account payee bank draught, or use of electronic clearing system through a bank account.
However, the rules of this section do not apply to- any invoice by-
a) The government;
b) any financial institution, post office savings bank, or co-operative bank;
ii) transactions of the type referred to in section 269SS;
iii) such other people, classes of persons, or invoices as the Central Government may specify by notification in the Official Gazette.
A BRIEF OVERVIEW OF THE INCOME TAX ACT, 1961
Sir James Wilson implemented income tax in India for the first time in 1860 to compensate for the damage caused by the 1857 military revolt. In 1886, a separate Income Tax Act was enacted, and it remained in existence for a long time, subject to various amendments from time to time. A new Income Tax Statute was passed in 1918, but it was quickly abolished by a new act enacted in 1922. Because of various changes, the 1922 Act became incredibly complicated. This Act is still in existence for the 1961-1962 fiscal year. The Indian government appointed the Law Commission in 1956 to clarify the law and prevent tax evasion.
In September 1958, the Law Commission, in collaboration with the Ministry of Law, submitted its findings. This legislation is now governed by the Income Tax Act of 1961, which entered into effect on April 1, 1962. It covers the whole country of India, including Jammu and Kashmir. Any legislation is insufficient in and of itself until the loopholes are addressed. The Income Tax Act of 1961, as well as a multitude of income tax rules, notifications, circulars, and court judgements, including tribunal decisions, control India’s income tax legislation.
The key provisions of Indian income tax legislation are as follows:
Applicability of the Income Tax Act, 1961
The Income Tax Act of 1961 applies to the entire country of India. The Income Tax Act addresses the following:
The foundation for revenue collection.
Purpose of the Income Tax Act
The Income Tax Act’s pretensions can be described as follows:
Features of the Income Tax Act
Income tax is the amount due when the government levies taxes on the direct income of those who live within its jurisdiction. India’s income tax system is incredibly complicated and has many other obstacles, challenges, and features. Even though the entire process may seem onerous, the residents of the nation may be affected by the situation’s efficient management. The government uses income tax as a tool to ensure that civic duties and activities are completed properly and on time.
The basic features of the act are as follows:
1. Income tax is assessed at the rate determined by the Finance Act for the current assessment year on income from the prior year.
2. A person is subject to income tax depending on the income from the prior year.
3. The taxpayer’s obligation is determined by his place of residence in the previous year.
4. Income tax obligations only arise when total revenue for the fiscal year surpasses the threshold tax-free amount determined by the Finance Act for that particular year.
5. Income tax rates are progressive, which means that when income grows, the tax burden does too.
6. It is required to withhold taxes from payments at the point of origin and deposit them in the government’s treasury.
Punishments and remedies under the Income Tax Act, 1961
If taxes are paid on time and on schedule, and reports are filed, the government will always have money available for public welfare. The Act has a number of penalties to ensure that taxpayers do not fail to file their taxes or provide information. A penalty is a consequence levied against a taxpayer who has violated the law. Indian tax authorities have been allowed the authority to penalise taxpayers for violations ranging from non-filing of returns to non-disclosure of income or non-payment of tax as part of the taxation systems. While fines for procedural infractions are often represented directly in figures, penalties for failing to pay taxes or declare income or transactions are usually expressed as percentages of the taxes payable or sums involved (generally, 100 to 300 percent). Starting with the fiscal year 2020-2021, fines for under-reporting or misreporting income can be imposed; before, penalties were only imposed for giving false information or concealing income.
Penalty procedures are not included in the Income Tax Act’s assessment methodology. Section 274 of the Income Tax Act of 1961 specifies the method that the tax authorities must follow in order to penalise the assessee. The technique, in particular, takes into account the notions of natural justice (i.e., due notice and hearing to be given to the assessee prior to impost). Section 273AA also allows you to request a penalty reduction from senior tax officials. The assessee may petition the appeal authority to have a penalty judgement against them reversed. Tax inspectors issuing show-cause letters, on the other hand, have the authority to punish assesses throughout the same procedures in compliance with both goods and services tax and customs regulations.
The Income-tax Act specifies specific penalties for taxpayers who commit crimes such as willful tax evasion, failure to pay already collected indirect taxes, and other related offences. Such offences are punishable by both a fine and incarceration. The tax evader is subsequently tried in accordance with the principles of the Criminal Procedure Code. As a result, taxpayers may benefit from the Code’s legal alternatives.
Important case laws
Citizens should pay income tax in order to advance their country rather than thinking of it as a burden. The general public should make an effort to understand the importance of income taxes and how their money is regarded to contribute to the development of the nation. In order for our country to keep up with other industrialised nations and advance further, every responsible citizen must always pay their income taxes on time. Our country’s progress and social breakdown would suffer if individuals started to see paying income tax as a burden and chose not to. As a result, paying income tax on time is important to avoid this.
11995 SCC Supl. (4) 100
2M/S. Bangalore Club vs The Commissioner of Wealth Tax on 8 September, 2020
32007 294 ITR 101 Bom
4Commissioner Of Income Tax vs M/S.Angels Educational Trust on 17 August, 2021
5M/S Liberty India vs Commr.Of Income Tax,Karnal on 31 August, 2009