Income Tax is applicable throughout India including the State of Jammu and Kashmir.

Tax is a compulsory contribution to state revenue by the Government. It is levied on the income or profits from business of individuals and institutions.

The Income Tax Act define the term income and it includes salary income, house property income, business / profession income, capital gain and other sources of income.

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

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

The exempted income from Income Tax are:
(i) Agriculture Income (Sec.10 (i)).
(ii) Payment received from family income by member of HUE
(iii) House Rent allowance subject to certain limit (lO(B/A)).
(iv) Any amount from Provident Fund paid to retiring employees (10(11)).
(v) Scholarship granted to meet the cost of education.
(vi) Family pension received by family member of armed forces.
(vii) Interest from certain exempted securities (10(15)).

According to Section (3) of Income Tax Act 1961, "The year in which income is earned is called previous year". It is also normally consisting of a period of 12 months commencing on 1st April every year and ending on 31st March of the following year. It is also called as financial year immediately following the assessment year.

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

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

Section 14 of Income Tax Act 1961 provides for the computation of total income of an assesse which is divided under five heads of income. Each head of income has its own method of computation. These five heads are;
Income from 'Salaries' [Sections 15- 17]
Income from 'House Property' [Sections 22-27]
Income from 'Profits and Gains of Business or Profession' [Sections 28- 44]
Income from 'Capital Gains' [Sections 45-55] and
Income from 'Other Sources' [Sections 56-59]

Tax is a compulsory contribution to state revenue by the Government. It is levied on the income or profits from business of individuals and institutions. It may be added to the price of goods, services or transactions. Tax is the basic source of revenue to the Government. This revenue is utilised for the expenses of civil administration, internal and external security, building infrastructure, etc. There are two types of taxes - direct taxes and indirect taxes.
1. 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 Gains Tax, Securities Transaction Tax,
Fringe Benefits Tax (from 2005), Banking Cash Transaction Tax (for Rs.50,000 and above - from 2005),etc.
3. In India all direct taxes are levied and administered by Central Board of Taxes. Direct
2. Indirect Tax:
1. If tax is levied on the goods or services of a person (seller).
2. It is collected from the buyers and is paid by seller to the Government.
3. It is called indirect tax.E.g. GST.