Income Tax Act 1961 Section 1
Income Tax Act, 1961 Section 1 defines the charge of income tax on total income of persons.
Income Tax Act, 1961 Section 1 establishes the fundamental charge of income tax on the total income of individuals and entities. It is the starting point for understanding how income tax liability arises under Indian law. This section is crucial for taxpayers, professionals, and businesses to comprehend their tax obligations clearly.
Section 1 deals with the charging provision, specifying that income tax shall be charged on the total income of every person for each assessment year. Understanding this section helps in grasping the basic framework of income tax liability and compliance requirements.
Income Tax Act Section 1 – Exact Provision
This section creates the charge of income tax on the total income of every person, which includes individuals, companies, firms, and others. It mandates that income tax is levied according to rates set annually by the Finance Act. Essentially, it forms the legal basis for income tax collection in India.
Defines the charge of income tax on total income.
Applies to every person, including individuals and entities.
Tax rates are prescribed annually by the Finance Act.
Income is assessed for each assessment year.
Forms the foundation for income tax liability.
Explanation of Income Tax Act Section 1
Section 1 states that income tax shall be charged on the total income of every person for each assessment year.
Applies to all persons, including individuals, companies, firms, HUFs, and others.
Tax is charged on the total income of the previous year.
Rates are prescribed annually by the Finance Act.
Triggers tax liability upon computation of total income.
Forms the basis for further tax provisions and assessments.
Purpose and Rationale of Income Tax Act Section 1
This section ensures that income tax is legally charged on all taxable income, providing the government with revenue to fund public services. It prevents tax evasion by establishing a clear legal basis for taxation.
Ensures fair and uniform taxation.
Prevents tax evasion by defining chargeability.
Supports government revenue collection.
Provides clarity on tax liability inception.
When Income Tax Act Section 1 Applies
Section 1 applies every financial year to all persons earning income chargeable under the Act, regardless of residential status or income source.
Relevant for each assessment year.
Applies to all types of income.
Includes residents and non-residents.
No exemptions from chargeability under this section.
Tax Treatment and Legal Effect under Income Tax Act Section 1
Section 1 charges income tax on total income computed under the Act. It interacts with provisions on income heads, exemptions, and deductions to determine taxable income. The section triggers the tax liability but does not specify rates, which are set by the Finance Act annually.
Charges tax on total income after deductions.
Forms the charging section for income tax.
Interacts with other sections for computation.
Nature of Obligation or Benefit under Income Tax Act Section 1
This section creates a mandatory tax liability for all persons with taxable income. It imposes a compliance duty to compute and pay tax as per prescribed rates. No exemptions or benefits arise directly from this section; it is the basis for tax charge.
Creates mandatory tax liability.
Applies to all persons with income.
Compliance duty to pay tax annually.
No direct exemptions or deductions.
Stage of Tax Process Where Section Applies
Section 1 applies at the initial stage of tax liability determination, charging tax on total income for the assessment year. It precedes computation, deduction, return filing, and assessment stages.
Income accrual and receipt stage.
Determination of chargeability.
Precedes return filing and assessment.
Sets basis for withholding and deductions.
Penalties, Interest, or Consequences under Income Tax Act Section 1
Non-compliance with the charge under Section 1 leads to penalties and interest under other sections. While Section 1 itself does not prescribe penalties, failure to pay tax charged results in legal consequences.
Interest on late payment under Section 234A/B/C.
Penalties for default in payment or filing.
Prosecution possible under Sections 276C/276CC.
Consequences of non-compliance are severe.
Example of Income Tax Act Section 1 in Practical Use
Assessee X earns a salary and business income in the financial year 2025-26. Section 1 charges income tax on the total income of Assessee X for the assessment year 2026-27. Based on the Finance Act rates, Assessee X computes tax liability and files returns accordingly.
Section 1 triggers tax liability on total income.
Taxpayer must comply with payment and filing.
Historical Background of Income Tax Act Section 1
Section 1 was introduced to establish a clear legal charge of income tax in India. Over time, amendments have aligned it with evolving tax policies and rates. Judicial interpretations have reinforced its role as the charging section.
Original intent: legal charge of income tax.
Amended by successive Finance Acts.
Judicial rulings affirm its foundational role.
Modern Relevance of Income Tax Act Section 1
In 2026, Section 1 remains the core charging provision for income tax. It supports digital compliance, including e-filing and TDS returns. Its clarity aids taxpayers and authorities in the faceless assessment environment.
Supports digital tax filings and AIS.
Integral to faceless assessments.
Ensures clarity in tax liability.
Related Sections
Income Tax Act Section 4 – Charging section.
Income Tax Act Section 5 – Scope of total income.
Income Tax Act Section 14 – Heads of income.
Income Tax Act Section 139 – Filing of returns.
Income Tax Act Section 143 – Assessment.
Income Tax Act Section 234A – Interest for default in return filing.
Case References under Income Tax Act Section 1
- Commissioner of Income Tax v. Kelvinator of India Ltd. (1981) 128 ITR 294 (SC)
– Confirmed the chargeability of income tax under the Act as per Section 1.
- Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC)
– Affirmed the scope of income charge under the Act.
Key Facts Summary for Income Tax Act Section 1
Section: 1
Title: Charge of Income Tax
Category: Charging provision
Applies To: Every person (individuals, companies, firms, etc.)
Tax Impact: Creates tax liability on total income
Compliance Requirement: Compute and pay tax annually
Related Forms/Returns: Income tax return forms (ITR)
Conclusion on Income Tax Act Section 1
Section 1 of the Income Tax Act, 1961, is the cornerstone of the Indian income tax system. It legally charges income tax on the total income of every person for each assessment year, laying the foundation for all subsequent tax provisions and compliance obligations.
Understanding this section is essential for taxpayers and professionals alike. It ensures clarity on when and how income tax liability arises, enabling proper tax planning and adherence to the law. Without Section 1, the entire tax structure would lack a legal basis for charging tax.
FAQs on Income Tax Act Section 1
What does Section 1 of the Income Tax Act specify?
Section 1 specifies that income tax shall be charged on the total income of every person for each assessment year at rates prescribed by the Finance Act.
Who is liable to pay tax under Section 1?
Every person, including individuals, companies, firms, and others, is liable to pay income tax on their total income under Section 1.
Does Section 1 mention the tax rates?
No, Section 1 charges tax but the rates are prescribed annually by the Finance Act for each assessment year.
When does the tax liability arise under Section 1?
Tax liability arises for the total income earned in the previous year, assessed in the relevant assessment year as per Section 1.
Are there any exemptions under Section 1?
Section 1 itself does not provide exemptions; exemptions are covered under other sections of the Income Tax Act.