Tax Rate Determination for Income Tax
The rate at which income tax is collected is not a permanent fixture. It is determined on a year-to-year basis.
Legal Basis for Tax Rate Fixation
In India, the power to legislate on taxes on income, other than agricultural income, rests with the Parliament, as per the Constitution.
- The Union Government prepares the budget annually.
- As part of the budget, the government proposes the tax rates for the upcoming financial year through a bill.
- This bill, known as the Finance Bill, is presented in Parliament.
- Upon discussion and approval by both houses of Parliament (Lok Sabha and Rajya Sabha), it is enacted as the Finance Act.
- Therefore, the annual Finance Act is the legislative instrument that specifies and fixes the tax rates applicable for that particular fiscal year.
This process ensures that tax rates are reviewed and approved annually, aligning with the government's fiscal policies and economic conditions.
Correct Option Analysis
Based on the legislative process, the tax rate for collecting income tax is fixed by the annual Finance Act, which requires parliamentary approval.
Correct Answer: The annual Finance Act
Important Questions from Income-tax
The Income Tax Act, 1961 provides for rebates and reliefs under___________
The Income Tax Act classifies income of a person under _______ different heads of income.
- Which of the following are termed as assessees under the Income Tax Act?
A) A Hindu Undivided Family
B) A Company
C) Body of Individuals For the purpose of computation of income tax, the period of twelve months commencing from the first day of April every year and ending on thirty first March of the next year is known as __________
In each assessment year income tax is charged at the rates given by __________
