Income Tax Department

Income Tax Department functions under the Department of Revenue in Ministry of Finance. It is responsible for administering following direct taxation acts passed by Parliament.

• Income Tax Act
• Wealth Tax Act
• Gift Tax Act
• Expenditure Tax Act
• Interest Tax Act
• Various Finance Acts (Passed Every Year in Budget Session)

Income Tax Department is also responsible for enforcing Double Taxation Avoidance Agreements and deals with various aspects of international taxation such as Transfer Pricing. Finance Bill 2012 seeks to grant Income Tax Department powers to combat aggressive Tax avoidance by enforcing General Anti Avoidance Rules.

Central Board of Direct Taxes

The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue in the Ministry of Finance, Government of India. It provides essential inputs for policy and planning of direct taxes in India and is also responsible for administration of the direct tax laws through Income Tax Department. The CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963.It is India’s official FATF unit.The Central Board of Revenue as the Department apex body charged with the administration of taxes came into existence as a result of the Central Board of Revenue Act, 1924. Initially the Board was in charge of both direct and indirect taxes. However, when the administration of taxes became too unwieldy for one Board to handle, the Board was split up into two, namely the Central Board of Direct Taxes and Central Board of Excise and Customs with effect from 1.1.1964. This bifurcation was brought about by constitution of the two Boards u/s 3 of the Central Boards of Revenue Act, 1963.
Organisational Structure of the Central Board of Direct Taxes : The CBDT is headed by CBDT Chairman and also comprises six members, all of whom are Special Secretary to Government of India.

• Member (Income Tax)
• Member (Legislation and Computerisation)
• Member (Revenue)
• Member (Personnel & Vigilance)
• Member (Investigation)
• Member (Audit & Judicial)

The CBDT Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service of India, whose members constitute the top management of Income Tax Department.

Income Tax Act of 1961

The major tax enactment in India is the Income Tax Act of 1961 passed by the Parliament, which imposes a tax on income of individuals and corporations. This Act imposes a tax on income under the following five heads:

• Income from house and property
• Income from business and profession
• Income from salaries
• Income in the form of capital gains
• Income from other sources

However, this Act is about to be repealed and be replaced with a new act which consolidates the law relating to Income Tax and Wealth Tax, the new proposed legislation is called the Direct Taxes Code (to become the Direct Taxes Code, Act 2010). Act was referred to Parliamentary standing committee which has submitted its recommendations. Act is expected to be implemented with changes from the Financial Year 2013-14.
§===Income tax rates=== In terms of the Income Tax Act, 1961, a tax on income is levied on individuals, Firms, corporations and body of persons, Local authorities, Artificial Juridical persons. The tax rate is prescribed every year by Parliament in the Finance Act, popularly called the Budget. In terms of the Finance Act, 2009, the rate of tax for individuals, HUF, Association of Persons (AOP) and Body of individuals (BOI) is as under;

• A surcharge of 2.50% of the total tax liability is applicable in case the payee is a Non-Resident or a Foreign Company; where the total income exceeds Rs 10,000,000.

Note : -
Education cess is applicable @ 3% on income tax, inclusive of surcharge if there is any. A marginal relief may be provided to ensure that the additional IT payable, including surcharge, on excess of income over 1,000,000 is limited to an amount by which the income is more than this mentioned amount.

Service tax

It is a tax levied on services provided in India, except the State of Jammu and Kashmir. The responsibility of collecting the tax lies with the Central Board of Excise and Customs(CBEC).
The ex-Finance Minister of India, Pranab Mukherjee in his Budget speech has indicated the government's intent of merging all taxes like Service Tax, Excise and VAT into a common Goods and Service Tax by the year 2011. To achieve this objective, the rate of Central Excise and Service Tax will be progressively altered and brought to a common rate. In budget presented for 2008-2009 It was announced that all small service providers whose turnover does not exceed 1,000,000 need not pay service tax.

1. Wealth Tax Act, which has a regular history of being passed and repealed;
2. Service Tax, imposed under Finance Act, 1994, which taxes the provision of services provided by service providers within India or services imported by Indian from outside India;
3. Central Excise Act, 1944, which imposes a duty of excise on goods manufactured or produced in India;
4. Customs Act, 1962, which imposes duties of customs, countervailing duties, and anti-dumping duties on goods imported in India;
5. Central Sales Tax, 1956, which imposes sales tax on goods sold in inter-state trade or commerce in Indisale of property situated within the state;
6. Entertainment taxes

Now, Service Tax and Excise will be inclusive part of GST in due course of time.