Context:
Review of Income Tax Act to be completed in given timeframe: CBDT Chairman
Income Tax Act, 1961:
- Foundational statute governing income taxation in India.
- Comprehensive framework for levying, administering, and collecting income tax.
- Income Tax – Direct tax borne by individuals without transfer option.
- Objectives –
- Economic Stability – Regulates private spending and ensures progressive taxation.
- Progressive Taxation – Ensures fair contribution based on income levels.
- Revenue Collection – Efficient collection and management of taxes from various sources.
Key Provisions of the Act:
- Tax Slabs – Defines income brackets and corresponding tax rates.
- Deductions – Allows deductions under specific heads like investments, medical insurance, and donations.
- Assessment – Laid out procedures for assessing taxable income, filing returns, and audits.
- Tax Deducted at Source (TDS) – Requires tax deduction at source for certain payments.
- Capital Gains – Regulates taxation on profits from asset sales, including short-term and long-term gains.
- Penalties and Appeals – Outlines penalties for non-compliance and dispute resolution procedures.
Recent Reforms:
- Corporate Tax Rates – Reduced from 29.49% (2017-18) to 23.26% (2021-22). Foreign company rate reduced to 35%. Angel tax abolished.
- Personal Income Tax Slabs – Fewer slabs and reduced rates for lower-income groups.
- Simplification of Tax Slabs results in increased taxpayers from 89.8 million to 93.7 million (2019-20 to 2022-23).
Central Board of Direct Taxes (CBDT):
- Origin – Traces back to the Central Board of Revenue Act, 1924.
- Initially managed both direct and indirect taxes.
- Split into CBDT for direct taxes and Central Board of Excise and Customs for indirect taxes in 1964.
- Formalised under – Central Boards of Revenue Act, 1963.
- Department – Department of Revenue within the Ministry of Finance.
- Functions
- Policy Formulation related to direct taxes, including income tax and corporation tax.
- Manages the Income Tax Department for efficient administration and enforcement.
- Suggests changes in direct tax laws and rates, and legislative amendments.
- Structure –
- Headed by a Chairman who coordinates Board functions.
- Members – 6 members, each holding the rank of ex-officio Special Secretary to the Government of India.
- Chairman and Members selected from the Indian Revenue Service (IRS).
Related Article: Tax Base Widens
Source: Economic Times
Previous Year Question
Consider the following:
1. Demographic performance
2. Forest and ecology
3. Governance reforms
4. Stable government
5. Tax and fiscal efforts
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?
[UPSC Civil Services Exam – 2023 Prelims]
(a) Only two
(b) Only three
(c) Only four
(d) All five
Answer: (b)
Explanation:
Criteria for horizontal devolution (Allocation Between the States) include: Income distance, area, population (2011), demographic performance, forest and ecology, and tax and fiscal efforts.
