TAXATION- BASIS OF CHARGE

INTRODUCTION

• Section 4 of the Income-Tax Act, 1961 (the Act), is the basic charging section under which income-tax is chargeable on the total income of every person. 
• The word “income” is defined under section 2(24) of the Act. 
• As per section 14, all income, for the purpose of charge of income-tax and computation of total income, is classified under five heads of income. 
• Then section 15 is the charging section in respect of “Income from salaries”, section 22 in respect of “Income from house property”, section 28 in respect of “Profits and gains of business or profession”, section 45 in respect of “Capital gains” and section 56 in respect of “Income from other sources”.

Charge of Income-Tax 

Section 4 of the Income-tax Act, 1961 is the charging section which provides that:
(i) Tax shall be charged at the rates prescribed for the year by the annual Finance Act. 

(ii) The charge is on every person specified under section 2(31); 

(iii) Tax is chargeable on the total income earned during the previous year and not the assessment year. (There are certain exceptions provided by sections 172, 174, 174A, 175 and 176); 

(iv) Tax shall be levied in accordance with and subject to the various provisions contained in the Act. 

This section is the back bone of the law of income-tax in so far as it serves as the most operative provision of the Act. The tax liability of a person springs from this section.