Question

Who imposes Income Tax?

• A. Central Government
• B. State Governments
• C. Local Governments
• D. All of these.

Hint:

Remember that major, nationwide taxes like Income Tax and Goods and Services Tax (GST, with its dual components) are primarily under the control of the Central Government in India, while states handle more localized taxes like VAT on alcohol and stamp duty.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
In a federal system like India, the power to levy taxes is divided between the central, state, and local governments as defined by the Constitution. Direct taxes, such as income tax, and indirect taxes form the main sources of government revenue.
Step 2: Detailed Explanation:
In India, the authority to levy income tax (on income other than agricultural income) is vested with the Central Government. This is specified under the Constitution of India. The Income Tax Act, 1961, governs the imposition of income tax. The Central Board of Direct Taxes (CBDT), which is a part of the Ministry of Finance, is responsible for the administration of direct taxes, including income tax.
- State Governments have the power to levy taxes on agricultural income, stamp duty, state excise, etc.
- Local Governments (like municipalities) levy property taxes, water taxes, etc.
Step 3: Final Answer:
Therefore, the income tax is imposed by the Central Government. The correct option is (A).