How does the Government collect the Income-Tax?

Taxes are collected by the Government by way of three means:

  1. Voluntary payments made by the taxpayers into various designated Banks, which includes Advance Tax and Self-Assessment Tax,
  2. Tax deducted at source, i.e., TDS, which is deducted from the income of the receiver, and
  3. Tax collected at source, i.e., TCS

Who is supposed to pay the Income-Tax?

Income tax is to be paid by every person. The term ‘person’ as defined under the section2 (3) of the Income-tax Act and covers the natural as well as the artificial persons under its ambit.

For the purposes of charging the Income-tax, the term ‘person’ includes the following: –

  1. Individual
  2. Hindu Undivided Families [HUFs]
  3. Association of Persons [AOPs]
  4. Body of individuals [BOIs]
  5. Firms
  6. LLPs, Companies
  7. Local authority and
  8. Any artificial juridical persons are not covered under any of the above.

Therefore, by the definition of the term ‘person’, it can be observed that apart from a natural person, i.e., an individual, any type of artificial entity will also be liable to pay the Income-tax.

What is a time period for which a person’s income is taken into account for the purposes of calculating the Income -Tax?

The Income-tax is levied on a person’s annual income, and the year under the Income-tax Law is the period initiating from 1st April and ending on 31st March of the subsequent calendar year.
The Income-tax Law classifies the year as the following: –

  • Previous year: – It is the year in which the income is earned.
  • Assessment year: – It is the year in which the income is charged to tax.

What is a Return of income?

ITR stands for the Income Tax Return. It is filed in a prescribed form. The particulars of the incomes earned by any person in a financial year and the taxes paid on such income are communicated to an Income-tax Department by filing an IT return.

ITR allows carrying forward the loss and further claim refunds from the income tax department.​ The Different forms of income returns are prescribed for filing the returns for different Status and Nature of income.

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