Question

What is the main statute in India governing direct taxation?

• A. Goods and Services Tax (GST) Act
• B. Income Tax Act
• C. Central Excise Act
• D. Customs Act

Hint:

When studying tax law, focus on understanding the Income Tax Act as it is central to all personal and business tax-related matters in India.

Answer 1

The Correct Option is B

The Income Tax Act is the primary legislation governing direct taxation in India. It provides for the levy, administration, collection, and recovery of income tax in India.

Answer 2

The main statute in India governing the imposition, collection, and administration of direct taxes is the Income Tax Act, 1961.

Overview of the Income Tax Act:
The Income Tax Act, 1961 came into effect on April 1, 1962, and is the comprehensive legislation that lays down the legal framework for the taxation of income in India. It applies to individuals, companies, firms, and other types of entities earning income within India or from Indian sources.

Key Features:
1. Taxable Entities: Includes individuals, Hindu Undivided Families (HUFs), companies, firms, associations of persons (AOP), bodies of individuals (BOI), and others.
2. Sources of Income: Income is taxed under five heads—Salary, House Property, Business or Profession, Capital Gains, and Other Sources.
3. Rates and Slabs: The Act defines tax slabs and rates for different categories of taxpayers and incomes.
4. Deductions and Exemptions: Sections such as 80C to 80U allow various deductions for investments, medical expenses, education loans, etc.
5. Administration: The Income Tax Department under the Central Board of Direct Taxes (CBDT) administers the Act.
6. Penalties and Prosecution: The Act provides for penalties, interest, and prosecution in case of non-compliance.

Significance:
The Income Tax Act is crucial for the functioning of the Indian economy as it enables the government to collect revenue which is used for public expenditure, infrastructure, welfare schemes, and national development.

Conclusion:
In India, the primary law that governs all aspects of direct taxation is the Income Tax Act, 1961, making it the cornerstone of the country’s tax administration framework.

Therefore, the correct answer is: Income Tax Act.