TABLE OF CONTENT

 ACKNOWLEDGEMENT

 AIMS AND OBECTIVES

 RESEARCH METDHOLOGY

 RESEARCH QUESTIONS

CHAPTERS TOPICS PAGE

NO.
CHAPTER 1
i. 1.1 INTRODUCTION 5-6 ii.

iii. 1.2 WHO ARE INCOME TAX PAYER 6

iv. v.

CHAPTER 2 2.1 HOW TO PAY TAX 7

2.2 WHAT IS INCOME TAX DEDUCTION 8-21

CHAPTER 3 3.1 EXISTING DEDUCTIONS UNDER INCOME TAX 22

ACT 1961

CHAPTER 4 4.1 DEDUCTION IN INCOME TAX UNDER CHAPTER 4 23

OF THIS ACT

4.2 INCOME TAX DEDUCTION NOT ADMISSIBLE 23-24

CONCLUSION 25
BIBLOGRAPHY 26

1
 AIMS AND OBECTIVES

The aims and objective of the tax deduction system was introduced with an aim to
collect tax from the very source of income. As per this concept, a person (deductor)
who is liable to make payment of specified nature to any other person (deductee) shall
deduct tax at source and remit the same into the account of the Central Government.
The deductee from whose income tax has been deducted at source would be entitled
to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate
issued by the deductor.

 RESEARCH QUESTIONS

 What is income tax?

 Who are the income tax payers in India?

 How the tax deduction of income tax takes place under income tax act,
1961?

 What are the exception to the income tax deduction?

 RESEARCH METDHOLOGY

 Secondary source

Books

 PRINCIPLE OF TAXATION BY ROY SAUNDERS ,TAXMAN

 Website

 tax deducted at source (tds),income tax department government of

india,tds jagrukta https:/ /www.
incometaxindia.gov.in/Pages/Deposit_TDS_TCS.aspx
 Income tax act 1961,aegon life https://www.aegonlife.com/insurance-
investment-knowledge/income-tax-act-1961/

 mode of citation

2
 BLOOK BOOK 20TH EDITION

CHAPTER 1.1INTRODUCTION

Introduction to Income Tax Act

Income tax as a concept has been present in India for many years, but James Wilson who
became India’s first finance (British) member introduced the first modern Income Tax Act in
1860. “It was only for the good of his subjects that he collected taxes from them, just as the
Sun draws moisture from the Earth to give it back a thousand fold,” wrote Kalidas in his epic
poem Raghuvansh.

What is Income Tax?

Income tax in India is a tax you pay to the government based on your income (and profit, in
the case of companies). The government uses this tax money for various purposes including
public services, infrastructure development, defence spending and subsidies among other
options. If you earn income beyond a certain limit, it is mandatory to pay income tax every
year.

Income Tax Act 1961

The Income Tax Act is a comprehensive statute that focuses on the different rules and
regulations that govern taxation in the country. It provides for levying, administering,
collecting and recovering income tax for the Indian government. It was enacted in 1961.

The Income Tax Act contains a total of 23 chapters and 298 sections according to the official
website of the Income Tax Department of India. These different sections deal with various
aspects of taxation in India. The various heads for which you have to pay income tax include:

1. Salary
2. Income from house property
3. Capital gains
4. Profit and gains from business or profession
5. Income from other sources

Every year, the Indian government presents a finance budget during the month of February.
The budget brings in various amendments to the Income Tax Act. This includes changes in
tax slabs wherever applicable. For example, the Finance Minister announced that the tax rate
for individuals in the lowest tax bracket of Rs. 2.5 lakh to 5 lakh would be cut from 10% to
5% in FY2017. Similarly, tax on Long Term Capital Gains (LTCG) was re-introduced during
the FY2018 budget. As a result, all gains greater than Rs. 1 lakh from shares and equity
mutual funds held longer than one year is now eligible for LTCG tax at 10%.

The most recent budget presented by the current Finance Minister Nirmala Sitharaman
included the introduction of a new optional system of taxation that comes with reduced
income tax rates. These new rates shall be available as an option from the financial year

3
2020-21.Such amendments become a part of the Income Tax Act from the following financial
year (beginning from 1st April) following the approval from the President of India.1

1.2 Who are income taxpayers in India?

Every Indian citizen has to pay income tax if their annual income is above Rs. 2.5 lakh (Rs. 3
lakh for senior citizens). In addition to individuals, entities such as Hindu Undivided Family
(HUF), Body of Individuals (BOI), corporate firms, companies, Artificial Juridical Persons,
local authorities and Association of Persons (AOP) also pay income tax.

6.84 crore people filed Income Tax Returns (ITRs) during FY2017-18. This resulted in net
direct tax collections of Rs. 9.95 lakh crore for the year. This was 17.1% higher than the
collections for the previous year according to the Central Board of Direct Taxes (CBDT).

Income tax slab rates :The income tax you pay depends on your annual income. Budget
2020 introduced new reduced tax rates that shall come into effect from the year 2020-21. The
tax slab rates according to the new system are categorized in the following way:

Income tax slabs Income tax rates

Less than Rs. 5 lakhs Exempt

Between Rs. 5 lakhs and 7.5 lakhs 10%

Between Rs. 7.5 lakhs and 10 lakhs 15%

Between Rs. 10 lakhs and 12.5 lakhs 20%

Between Rs. 12.5 lakhs and 15 lakhs 25%

Above Rs. 15 lakhs 30%

From FY 2020-21, taxpayers shall have the option to choose between the existing taxation
system and the new regime. The new system has revised the income slabs and reduced the
rates thereon. Another major change in the new scheme is that many of the deductions and
exemptions generally applicable in the old tax regime are no longer valid. Nearly 70 of the
100 or so existing deductions and exemptions are to be scrapped in the new regime.
Taxpayers can compare their tax liabilities under the two systems and opt for the one that’s
most beneficial to them.2

CHAPTER 2.1

How to pay tax

1
Income tax act 1961,aegon life https://www.aegonlife.com/insurance-investment-knowledge/income-tax-
act-1961/
2
Income tax act 1961,aegon life https://www.aegonlife.com/insurance-investment-knowledge/income-tax-
act-1961/

4
 Introduction

The concept of TDS was introduced with an aim to collect tax from the very source of
income. As per this concept, a person (deductor) who is liable to make payment of specified
nature to any other person (deductee) shall deduct tax at source and remit the same into the
account of the Central Government. The deductee from whose income tax has been deducted
at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS
or TDS certificate issued by the deductor. 
Rates for deduct of tax at source

Taxes shall be deducted at the rates specified in the relevant provisions of the Act or the First
Schedule to the Finance Act. However, in case of payment to non-resident persons, the
withholding tax rates specified under the Double Taxation Avoidance Agreements shall also
be considered

 TDS Rates
 Withholding Tax Rates

 Tax Rates DTAA v. Income-tax Act 

How to pay Tax Deducted/Collected at source?

Tax deducted or collected at source shall be deposited to the credit of the Central
Government by following modes:

 1) Electronic mode: E-Payment is mandatory for

o a) All corporate assesses; and
o b) All assesses (other than company) to whom provisions of section 44AB
of the Income Tax Act, 1961 are applicable.
 2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch

Where tax is deducted/collected by government office, it can remit tax to the Central
Government without production of income-tax challan. In such case, the Pay and Accounts
Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other
person by whatever name called to whom the deductor reports the tax so deducted and who
are responsible for crediting such sum to the credit of the Central Government, shall submit a
statement in Form No. 24G.to NSDL with prescribed time-limit.3

3
tax deducted at source (tds),income tax department government of india,tds jagrukta https:/ /www.
incometaxindia.gov.in/Pages/Deposit_TDS_TCS.aspx