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
Tax audit is compulsory in the case of a person carrying on profession and whose gross receipts exceeds which one of the following?
Which are the appropriate tax planning perspectives in case of shutdown or continued decision under the Income Tax Act, of 1961?
A. Business loss and unabsorbed depreciation can be carried forward and set off against profit and gain.
B. The loss-making company and profit-making company may merge to avail of the tax benefit
C. Tax benefit of deduction u/s 33 AB and 115 VT may be withdrawn and liable to tax for the year in which the business is discontinued.
D. The condition of section 80 IB / 80 IC of the Act, a deduction is allowed for such undertaking
E. If a person has more than one business, the loss-making business may not be discontinued.
Choose the most appropriate answer from the options given below:
Belated return u / s 139(4) can be filled at any time
Which of the following is NOT a change of the new Income Tax bill introduced in the Parliament during February 2025?
What is the basic difference in the aggregates at market price and factor cost?
