Income – Tax Law

In India, Income tax was introduced for the first time in 1860, by Sir James Wilson in order to
meet the losses sustained by the Government on account of the Military Mutiny of 1857.
Thereafter; several amendments were made in it from time to time. In 1886, a separate Income tax
act was passed. This act remained in force up to, with various amendments from time to time. In
1918, a new income tax was passed and again it was replaced by another new act which was
passed in 1922.This Act remained in force up to the assessment year 1961-62 with numerous
amendments. The Income Tax Act of 1922 had become very complicated on account of
innumerable amendments. The Government of India therefore referred it to the law commission
in1956 with a view to simplify and prevent the evasion of tax. The law commission submitted its
report-in September 1958, but in the meantime the Government of India had appointed the Direct
Taxes Administration Enquiry Committee submitted its report in 1956.In consultation with the
Ministry of Law finally the Income Tax Act, 1961 was passed. The Income Tax Act 1961 has
been brought into force with 1 April 1962. It applies to the whole of India including Jammu and
Kashmir.
Income-tax law in India
The income tax law in India consists of the following components:
1. Income tax Acts
2. Income tax rules
3. Finance Act
4. Circulars, notifications etc
5. Legal decision of courts
Finance Act:
Every year, the Finance Minister of the Government of India presents the Budget to the
Parliament. Once the Finance Bill is approved by the Parliament and gets the assent of the
President of India, it becomes the Finance Act.
Income-tax Rules:
The administration of direct taxes is looked after by the Central Board of Direct Taxes (CBDT).
The CBDT is empowered to make rules for carrying out the purposes of the Act. For the proper
administration of the Income-tax Act, the CBDT frames rules from time to time. These rules are
collectively called Income-tax Rules, 1962.
Circulars and Notifications:
Circulars are issued by the CBDT from time to time to deal with certain specific problems and to
clarify doubts regarding the scope and meaning of the provisions. These circulars are issued for
the guidance of the officers and/or assessees.