The Income-tax Act, 1961 serves as India’s primary statute for levying, administering, collecting, and recovering income tax. Originally intended to be replaced by the “Direct Taxes Code,” the latter was later abandoned by the government.

Annually, the Indian government presents the Finance Bill, which introduces amendments to the Income-tax Act, including changes to tax rates and slabs. These amendments typically take effect in the following financial year, starting on April 1, pending approval by the President of India.

In cases where a full financial year budget cannot be presented, such as during general elections, a “Vote on Account” is introduced to maintain essential government expenditures. A comprehensive budget is subsequently presented after a new government takes office.

The scope of total income is contingent upon the taxpayer’s category and residential status. Indian residents are liable to pay taxes on their global income, while non-residents are taxed only on their Indian income. The Income-tax Act recognizes five categories of income: Salary, House Property, Business or Profession, Capital Gains, and Other Sources. The tax on total income is calculated based on the specified tax rates for the relevant financial year.

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