Tax is a mandatory financial charge or levy imposed by the Government on individuals, businesses, or other entities to generate revenue for public expenditure. In India, taxes are broadly categorized into two types: Direct Tax and Indirect Tax. Direct taxes are levied directly on the income or wealth of individuals and organizations (like Income Tax), whereas indirect taxes are imposed on goods and services (like GST). The main purpose of taxation is to mobilize resources for nation-building, economic development, and to ensure redistribution of wealth among citizens.
The constitutional authority for taxation in India is derived from Article 265 of the Constitution which states, “No tax shall be levied or collected except by authority of law.” The Income Tax Act, 1961, is the principal statute governing the levy and collection of income tax in India. Section 2(24) defines ‘income’ broadly, while Section 4 lays down the chargeability of income tax. Section 80C to 80U provide deductions and exemptions. The Goods and Services Tax (GST) is governed by the CGST Act, 2017, and Section 9 of the Act provides for the levy of CGST on intra-state supplies.
To remember the concept of taxation in Indian law, use the mnemonic “TIGER”:
T – Types of tax (Direct & Indirect)
I – Income Tax Act & GST Act
G – Government’s authority (Article 265)
E – Exemptions and Deductions (Sections 80C-80U)
R – Revenue for public welfare
This mnemonic helps recall the key aspects: tax types, statutory backing, constitutional provisions, legal sections, and its purpose.
