Income Tax Act

• The Income Tax Act, 1961 is the main law governing income tax in India.
• It tells you who pays tax, how much tax, and when to pay.
• It also lists exemptions, deductions, and penalties for breaking rules.

Think of it as a big rulebook that explains everything about income tax in India.

Key Chapters & Sections

The Act is divided into many chapters. Here’s a simple breakdown:

1. Chapter I (Sections 1–4)
   • Title & scope—who must file, where it applies.
2. Chapter II (Sections 5–9)
   • Income sources—salary, business, property, etc.
3. Chapter III (Sections 10–13)
   • Exemptions—what income isn’t taxed (e.g., certain allowances, agricultural income).
4. Chapter IV (Sections 14–15)
   • Chargeability—who is resident or non-resident, global income.
5. Chapter VI (Sections 24–59)
   • Deductions—like Section 80C (₹1.5 lakh limit for PPF, insurance), 80D, 80E, 80TTA.
6. Chapter XI (Sections 197A–234A)
   • Advance tax & TDS—when tax is deducted by employer or banks.
7. Chapter XII-A (Sections 234B–234C)
   • Penalties for late tax or wrong returns.
8. Chapter XVII (Sections 271–280)
   • Penalties & prosecutions—for serious violations.
9. Chapter XXII (Sections 292B–293B)
   • Appeals & dispute resolution—how to challenge tax orders.

Scope & Who It Applies To

It applies to all individuals and entities earning income from:

• Salary or business/profession
• House property (rent or deemed rent)
• Capital gains (selling property, stocks)
• Other sources (interest, dividends, lottery)
• Foreign income and assets, depending on residency

Everyone must file if income is above the basic exemption limit (₹2.5 lakh for most individuals). It covers residents, NRIs, partnerships, companies, trusts, etc.

Why It Matters

• Helps calculate total taxable income after applying exemptions and deductions.
• Establishes rules for filing tax returns, paying tax, and TDS/deduction at source.
• Defines procedures for handling disputes, penalties, and appeals.

Quick Flowchart

1. Determine your total income from Chapters II & IV.
2. Subtract exemptions (Chapter III) and deductions (Chapter VI).
3. Compute taxable income and apply rates.
4. Pay tax via TDS or advance payments (Chapters XI & XII-A).
5. File annual ITR.
6. If dispute arises, use appeal routes in Chapter XXII.

Summary

• The Income Tax Act, 1961 is India’s complete guidebook to income tax.
• It outlines what to tax, what not to tax, how to deduct, and when to pay.
• Chapters are organized by topic—income sources, exemptions, deductions, penalties, appeals.
• Applies to all taxpayers—individuals, businesses, NRIs—with clear rules for filing and compliance.