Income Tax in India – An introduction

Income tax in India is governed by the Income Tax Act, 1961 which was passed on 13^th September, 1961.

Income tax law is amended every year under the Finance Bill of the respective year which when receives the President’s assent, becomes the Finance Act of the respective year.

Two types of years are very important while calculating Income tax:

• Previous Year – It is the period for which we consider the income to be taken to calculate income tax. It is usually a whole year from 1^st April to 31^st March but not necessarily always a whole year. For Example, if a person starts his/ her business in the middle of the year, then his/ her previous year will be the date of starting the business till 31^st March.
• Assessment Year – It is the period in which the Income Tax authorities assess the tax for the previous year. In easy words, it is the period in which a person pays the calculated tax. It is always the next year after the previous year and it is always a whole year from 1^st April to 31^st March.

Currently, Previous year 2022-23 and Assessment year 2023-24 is going on which will end on 31^st March, 2023.

Income Tax covers various types of assessees which include:

• Individual
• Company (Private, Domestic, Foreign, Public)
• Hindu Undivided Family (HUF)
• Cooperative Society
• Association of Persons (AOP)
• Body of Individuals (BOI)
• Artificial Juridical Person
• Firm (including Limited Liability Partnership)
• Local Authority

Indian Income Tax law is one of the most complex and robust system in the entire world. Income Tax Act, 1961 is led by the Income Tax law, 1962. Currently, Finance Act, 2022 is enacted which received the President’s assent on 30^th March, 2022.