Presentation on Laws

relating to Income tax

Presented By :

Nasim Akhtar
( ADTU/2020-23/BBA/004)

Iftikar Rahman
(ADTU/2020-23/BBA/042)
What is Income Tax?
Income tax is an annual tax levied in every
assessment year at the prescribed rates, on every
person, in respect of his/her total income for the
relevant previous year.
 Component of Income Tax Law

 Income Tax Act, 1961

 Income Tax Rules, 1962
 The Financial Act
 Circulars
 Government Notification
 Court Decision

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 Income Tax Act, 1961
The Income Tax Act, 1961 is an act to levy, administer, collect, and
recover income tax in India. The act is effective from 1 April 1962. It
consists of 298 sections and 14 schedules. The act helps determine a
taxpayer’s taxable income, tax liability, appeals, penalties , and prosecution.
The government has been making amendments to the act from time to time.
 Income Tax Rules, 1962
Income tax rules act as a supplement to the Income Tax Act, 1961. Income tax rules are effective
from 1 April 1962. The Central Board of Direct Taxes (CBDT) has the power to amend the income
tax rules.

For example, Section 10 (13A) (1) of the Income Tax Act states that the house rent allowance can
be exempted up to a certain limit. Rule 2A under income tax rules states how the limit can be
calculated.
 The Finance Act
The Finance Minister of India presents a Finance Bill every year that proposes amendments to
the direct and indirect taxes. When both the houses of the Parliament passes the bill, it receives
consent from the President of India and becomes the Finance Act. Such amendments will
become a part of the Income Tax Act and will be implemented from the first day of the next
financial year usually.

In addition, the Finance Act consists of four parts:

Part I:  It specifies the rate at which income tax is levied for various income categories during
a financial year.

Part II:  It specifies the rate at which tax must be deducted at source during the financial year.

Part III:  It states the changes in income tax rates in specific cases, i.e. the rate for income
chargeable under salary head and rate for computing advance tax for a financial year.

Part IV:  It explains the rules for calculating agricultural income in this part.
 Circulars
The provision of the Income Tax Act are not very clear and complete therefore
various types of circulars are being issued by the CBDT from time to time to avoid
any sort of controversy and ambiguity.
 Government Notification
According to the Income Tax Act, 1961 and the Income Tax rules, Central Government
has the power to issue the notification in several cases. Such notifications are issued by
the Ministry of Finance regarding exemption of various payments to employees such as
Allowance, Pension, Leave Encashment , Cost Inflation, Index for long-term capital gain,
Exemption of interest on certain security.

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 Court Decisions
(a)Supreme Court: The decisions given by the Supreme Court becomes law. All
decisions given by Supreme court are binding on all the courts, Appellate
Authorities, Income Tax authorities, and the assessees . Where any two judgments
are contradictory then the decision of the larger bench ( whether earlier or later in
time) shall prevail. In the case where benches have an equal number of judges then
later decision shall prevail.

(b) High Court: High court decisions are binding on the tribunal, Income Tax
Authorities and on all assesses falling under its jurisdiction.

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Thanks!

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