CBDT provides essential inputs for policy framing and planning of direct taxes and also administers the direct tax laws through the Income-Tax Department. Thus, Income-Tax Law is administrated by the Income-Tax Department under the control and supervision of CBDT.

It is mandatory for every citizen of India to pay income tax on time. Failing to do so will make you liable for a hefty penalty. CBDT provides essential inputs for policy framing and planning of direct taxes and also administers the direct tax laws through the Income-Tax Department. Thus, Income-Tax Law is administrated by the Income-Tax Department under the control and supervision of CBDT.

It is, therefore, a must to know the legal framework of taxation because it will help you get more clarity on the various aspects of taxation policy.

Who is supposed to pay income tax?

Income tax has to be paid by every person who generates income. For the purpose of charging income tax, the term ‘person’ includes individual, Hindu undivided families (HUFs), association of persons (AOPs), body of individuals (BOIs), firms, LLPs, companies, local authority and any artificial juridical person not covered under any of the above.

Thus, from the definition of the term ‘person’, it can be observed that apart from a natural person, i.e., an individual, any sort of artificial entity will also be liable to pay income tax.

What is the administrative framework of income tax?

The revenue functions of the Government of India are managed by the Ministry of Finance. The Finance Ministry has entrusted the task of administration of direct taxes like income tax, wealth tax, etc., to the Central Board of Direct Taxes (CBDT). CBDT is a part of the department of revenue in the Ministry of Finance.

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How does the government collect income tax?

Taxes are collected by the government through three means:

a) voluntary payment by taxpayers into various designated banks. For example, Advance Tax and Self Assessment Tax paid by the taxpayers,
b) Taxes deducted at source (TDS) from the income of the receiver, and
c) Taxes collected at source (TCS). It is the constitutional obligation of every person earning income to compute his income and pay taxes correctly.

How will you get to know how much income tax you need to pay?

The rates of income tax and corporate taxes are available in the Finance Act passed by the Parliament every year. You can also check your tax liability by using the free online tax calculator available at the CBDT website.
How is advanced tax calculated?

Advance tax is to be calculated on the basis of expected tax liability of the year. Advance tax is to be paid in installments as given below:

a) In case of all the assesses (other than the eligible assessees as referred to in section 44AD) :
i) Up to 15 per cent – On or before 15th June
ii) Up to 45 per cent – On or before 15th September
iii) Up to 75 per cent – On or before 15th December
iv) Up to 100 per cent –On or before 15th March
b) In case of eligible assessee as referred to in Section 44AD:
Up to 100 per cent – On or before 15th March
Note: Any advance tax paid on or before 31st day of March shall also be treated as paid during the same financial year.

Do you need to maintain records or proofs of earning?

For every source of income you have to maintain proof of earning and the records specified under the Income-Tax Act. In case no such records are prescribed, you should maintain reasonable records with which you can support the claim of income.

What is a tax on regular assessment and how is it paid?

Under the Income-Tax Act, every person has the responsibility to correctly compute and pay his due taxes. Where the Department finds that there has been understatement of income and resultant tax due, it takes measures to compute the actual tax amount that ought to have been paid. This demand raised on the person is called tax on regular assessment. The tax on regular assessment has to be paid within 30 days of the receipt of the notice of demand.