Income Tax is a direct tax levied by the central government on fixed percentage according to the income limit of an individual / non-individual entity. The income taken into consideration for the calculation of tax is any receipt of money arising with certain regularity from a defined source. All the provisions for deduction and rebates are defined under Income Tax Act 1961. Income Tax is basically a direct means of taxation such as capital gains tax, transaction & securities tax, etc.

The income tax that is levied every month on various contractual incomes forms a hefty part of the government’s revenue which is by the Ministry of Finance. The Ministry of Finance has delegated responsibility to the Central Board of Direct Taxes (CBDT) for a better coordination amongst other bodies. Income Tax Department, under the Ministry of Finance, is responsible for supervising the collection of all Taxes on the various forms of earnings at a prescribed rate which is announced every year in the Union Budget. The Central Board of Direct Taxes (CBDT) controls the policy framework and planning of taxes. In addition to the collection of taxes, the IT department is also involved in prevention and detection of tax avoidance. The revenue generated as Income tax is further utilized to fund various infrastructural developments and manage the operating expenditure of state and central governments, etc.