Income Tax Act, 1961 - Introduction & Constitutional Provision

on

Income Tax Act, 1961

Introduction & Constitutional Provision

India is a federal union of States with distribution of powers. Articles 245 to 255 of the Constitution of India relate to legislative relations between the Union and States in the form of distribution of legislative powers between the Parliament and the Legislature of a State.

Powers to make laws are conferred by Articles 245, 246 and 248 of the Constitution while subject matters of laws to be made by Parliament and Legislature of a State are listed in Schedule VII to the Constitution.

As per Article 265, No tax shall be levied or collected except by authority of law. Distribution of legislative powers is stipulated in Article 246 read with Schedule VII of the Constitution of India. There are three lists in Schedule VII in respect of which Union or State or both will have concurrent power to make laws.

 

List I

Union List comprises of several items or subjects over which the Union i.e. Central Government has exclusive powers of legislation.

List II

State List comprises of several items or subjects over which the State Legislature shall have the exclusive powers of legislation.

List III

Concurrent list Comprises of several items over which the Parliament and the Legislatures of States shall have concurrent powers of legislation.

 








In respect of levy of taxes and duties, Union and States have respective powers under Union List and State List, the summary of which is provided as under:

1. Tax-related entries in the Union List (List-I of Schedule VII)

Entry No.

Particulars

82

 Taxes on income other than agricultural income.

83

 Duties of customs including export duties.

84

 Duties of excise on the following goods manufactured or produced in India, namely :
(a) petroleum crude;
(b) high speed diesel;
(c) motor spirit (commonly known as petrol);
(d) natural gas;
(e) aviation turbine fuel; and
(f) tobacco and tobacco products

85

 Corporation tax

86

 Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies.

87

 Estate duty in respect of property other than agricultural land.

88

 Duties in respect of succession to property other than agricultural land.

89

 Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights.

90

 Taxes other than stamp duties on transactions in stock exchanges and futures markets.

91

 Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.

2. Tax-related entries in the State List (List - II of Schedule VII)

Entry No.

Particulars

46

Taxes on agricultural income.

47

Duties in respect of succession to agricultural land.

48

Estate duty in respect of agricultural land.

49

Taxes on lands and buildings.

50

Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.

51

Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India :

(a)  alcoholic liquors for human consumption;

(b)   opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub- paragraph (b) of this entry.

53

Taxes on the consumption or sale of electricity

54

Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods.

56

Taxes on goods and passengers carried by road or on inland waterways.

57

Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of List III.

58

Taxes on animals and boats.

59

Tolls.

60

Taxes on professions, trades, callings and employments.

61

Capitation taxes.

62

Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council

63

Rates of stamp duty in respect of documents other than those specified in the provisions

of List I with regard to rates of stamp duty.

3. Other constitutional provisions:

Article No.

Particulars

Article 13

Laws inconsistent with or in derogation of the fundamental rights.

Article 245

Extent of laws made by Parliament and by the Legislatures of States.

Article 246

Subject matter of laws made by Parliament and by the Legislatures of States.

Article 246A

1.         Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.

2.         Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.

Explanation- The provisions of this article, shall, in respect of goods and services tax referred to in clause (5), of article 279A, take effect from the date recommended by the Goods and Services Tax Council.’’.

Article 248

Residuary powers of legislation.

Article 265

Taxes not to be imposed save by authority of law.

Article 269

Taxes levied and collected by the Union but assigned to the States.

(1) Taxes on the sale or purchase of goods and taxes on the consignment of goods except as provided in Article 269A shall be levied and collected by the Government of India but shall be assigned and shall be deemed to have been assigned to the States on or after the 1st day of April, 1996 in the manner provided in clause (2).

Article 269A

Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Explanation: For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.

Article 270

Taxes levied and distributed between the Union and the States.- (1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in articles 268,

*268A and 269, respectively, surcharge on taxes and duties referred to in article 271 and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2).

Article 271

Surcharge on certain duties and taxes for purposes of the Union.

Article 273

Grants in lieu of export duty on jute and jute products.

Article 274

Prior recommendation of President required to Bills affecting taxation in which States

are interested.
 

Article 276

Taxes on professions, trades, callings and employments.

Article 279A

1.                   The President shall, within sixty days from the date of commencement of  the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council.

2.                   The Goods and Services Tax Council shall consist of the following members, namely:

(a)                 the Union Finance Minister - Chairperson;

(b)                 the Union Minister of State in charge of Revenue or Finance - Member;

(c)                  the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government-Members.

The Members of the Goods and Services Tax Council referred to in sub clause (c) of clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice- Chairperson of the Council for such period as they may decide.

Article 286

Restrictions as to imposition of tax on the sale or purchase of goods.

Article 289

Exemption of property and income of a State from Union taxation.

Article 298

Power to carry on trade, etc. The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose.

Article 304

Restrictions on trade, commerce and intercourse among States.

Article 366

Definitions

(6)     “corporation tax” means any tax on income, so far as that tax is payable by

companies and is a tax in the case of which the following conditions are fulfilled:-

(a)      that it is not chargeable in respect of agricultural income;

(b)      that no deduction in respect of the tax paid by companies is, by any enactments which may apply to the tax, authorised to be made from dividends payable by the companies to individuals;

(c)      that no provision exists for taking the tax so paid into account in computing for the purposes of Indian income-tax the total income of individuals receiving such dividends, or in computing the Indian income-tax payable by, or refundable to, such individuals;

(12) “goods” includes all materials, commodities, and articles;

(12A) “goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption;’

Income tax being direct tax happens to be one of the major source of revenue for the Central Government. The entire amount of income tax collected by the Central Government is classified under the head:
1. Corporation Tax (Tax on the income of the companies); and
2. Income tax (Tax on income of the non-corporate assessees)
The classification of Income tax into above two categories is of great assistance to Central Government while preparing budget estimates and setting the target. It is also important for easy division of tax between the Central and State Government as the proceeds from Corporation tax are not divisible with the States [Article 270(1) read with Article (4)(a)].

Comments

Post a Comment