Question

Who among the following gets the benefit of income tax?

• A. Central government
• B. State governments
• C. Both the Central and State governments
• D. None of these

Hint:

Income tax revenue is primarily collected by the central government, but the revenue is shared with the state governments based on the Finance Commission's recommendations.

Answer 1

The Correct Option is C

Step 1: Understanding Income Tax Distribution:
Income tax is a form of direct taxation levied on individuals' or entities' earnings. In India, both the central government and state governments have the authority to levy and collect taxes, but income tax is primarily collected by the central government. However, the revenue from income tax is shared between the central and state governments through the Finance Commission.
Step 2: Analyzing the Options:
- Option (A) Central government: The central government is the main authority for collecting income tax, but it shares the revenue with the state governments.
- Option (B) State governments: State governments receive a share of income tax revenue, but they do not directly levy income tax.
- Option (C) Both the Central and State governments: This is the correct answer. The revenue from income tax is shared between the central and state governments according to the recommendations of the Finance Commission.
- Option (D) None of these: This is incorrect, as both central and state governments benefit from income tax revenue.
Step 3: Conclusion and Answer:
The correct answer is (C) because both the central and state governments receive benefits from the revenue generated by income tax.