The year in which tax is paid is called the assessment year.

Assessee means a person by whom any tax or any other sum of money is payable under this act.

The term 'person' includes the following:
(i) An individual
(ii) A Hindu Undivided Family (HUF)
(iii) A Company
(iv) A Firm
(v) An Association of Persons or a Body of Individual, whether incorporated or not
(vi) A local authority, and
(vii) Every artificial, juridical person E,g. an idol or deity

The year in which income is earned is called "previous year".

Income tax is a direct tax under which tax is calculated on the income, gains or profits earned by a person such as individuals and other artificial entities (a partnership firm, company, etc.)

(i) The central Government constituted the Central Board of Direct Taxes.
(ii) In India all direct taxes are levied and administered by central Board of direct taxes.
(iii) Income-tax is administered by the Central Government (Ministry of finance) with the help of income tax department.

There are two types of taxes direct taxes and indirect taxes,
(i) Direct Tax:
(1) If a tax levied on the income or wealth of a person and is paid by that person or his office directly to the Government, it is called direct tax.
(2) E.g: Income tax, wealth tax, capital gain tax, etc.
(ii) Indirect Tax:
(1) If tax is levied on the goods or services of a person (seller), it is collected from the buyers and is paid by seller to the Government, it is called indirect tax.
(2) E.g. GST

Out of Gross Total Income, Income tax Act, 1961 allows certain deductions under section 80. After allowing these deductions the figure which we arrive at is called 'Total Income' and on this figure tax liability is computed at the prescribed rates.

These five heads are :
(i) Income from salaries (sections 15-17) 
(ii) Income from House Property (sections 22-27)
(iii) Income from 'Profits and gains of Business or Profession' (sections 28-44)
(iv) Income from capital gains (section 45-55) and
(v) Income from other sources (section 56-59)

Income aggregated after adjusting past and present losses and the total so arrived at is known as 'Gross Total Income'.

Income includes the followings :
(i) Profits and gains of business or profession
(ii) Dividend
(iii) Voluntary contribution received by a charitable/religious trust or university / educational institution or hospital/electoral trust.
(iv) Value of perquisite or profit in lieu of salary taxable U/S 17 and social allowance or benefit specifically granted either to meet personal expenses or for performance of duties of an office or an employment of profit.
(v) Export incentives, like duty draw back cash compensatory support, sale of licenses, etc.
(vi) Interest, salary, bonus, commission or remuneration earned by a partner of a firm from such firm.
(vii) Capital gain chargeable U/S 45
(viii) Profits and gains from the business of banking carried on by a co-operative society with its members.
(ix) Winning from lotteries, cross word puzzles, races, including horse races, card games, and other games of any sort or from gambling or betting of any form or nature whatsoever.
(x) Deemed income u/s 41 or 59.

Features of Income Tax in India:
(i) Levied as per the constitution:
Income tax is levied in India by virtue of entry No. 82 of List I (Union List) of seventh schedule to the Article 246 of the constitution of India.
(ii) Levied by Central Government:
1. Income tax is charged by the Central Government on all incomes other than agricultural income.
2. However, the power to charge income tax on agricultural income has been vested with the State Government as per entry 46 of list I, i.e., State List
(iii) Direct Tax :
1. Income Tax is a direct tax.
2.It is because the liability to deposit and ultimate burden are on the same person.
3. The person earning income is liable to pay income tax out of his own pocket and cannot pass on the burden of tax to an a another person.
(iv) Annual Tax:
Income tax is an annual tax, because it is the income of a particular year which is chargeable to tax.
(v) Tax on person:
1. It is a tax on income earned by a person
2. The term 'person' has been defined under the Income tax Act.
3. It includes individual, Hindu Undivided Family, Firm, Company, local authority, Association of Person or Body of Individual or any other artificial juridical persons
4. The persons who are covered under Income tax Act are called 'assessees'.