Income Tax laws in India are governed by the Income Tax Act 1961. The act is very vast and complex.

Income Tax act can be devided largely in two groups. One is related to tax payers (Computation of income and filing of returns), another is related to IT Department (Assessment procedure, penalties, prosecutions etc.)

As a tax payer you can refer the act in following ways:

Computation of Income and filing of Returns

Tax payers can refer the specific section related to the income earned. For example if you have income from house property, you can refer sections related to house property income and file the returns accordingly.

Complaince with Rules and how to treat Foreign incomes/Expenses

Computation of Income and filing the returns are basic requirements of act. IT Act requires many rules to be complied with. Tax payers having income from business need to follow many rules such as Tax Deduction at Source, Payment in Cash etc.

Tax payers need to pay advance taxes, file tds statements etc.

Foreign incomes/expenses are not only governed by Income Tax act but also Double Taxation Avoidance Agreements (DTAA). DTAA are entered between 2 countries to avoid double taxation of income or to lower the tax demands to encourage common trades.

Tax payers can pay the taxes based on the rates specified in DTAA or Income Tax Act 1961, whichever favours him.

Assessment Procedure, prosecutions and Penalties

Tax payers needs to refer the sections related to procedure for settlement of Income Tax demands.

Different sections have difference rules for different types of demands. Notice received should be analysed based on the provisions contained in section under which notice is issued, and communication with IT Department should be accordingly.

Do you have any problem with current Income Tax Act and rules? Should the act be made more liberal and business friendly?

Posted 3 years, 10 months ago by CA Pulkit Sharma

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