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Income Tax Act 1961: Chapters, Objectives, Features, Provisions

By Sujaini Biswas


Updated on: May 29th, 2023


27 min read

Planning to pay your taxes for the first time? Are you confused between the different sections and provisions of income tax? Then know that you are not alone. Every first-time taxpayer should know the basics of how income tax is levied in India. In this regard, you need to know about certain aspects of the Income Tax Act 1961. The Income Tax Department levies taxes based on this Act passed by the Government of India. 

Keep reading this article to know more! 

What is the Income Tax Act 1961?

The Income Tax Act 1961 is the set of rules and regulations upon which the Income Tax Department levies, administers, collects and recovers taxes. It contains 298 sections, 23 chapters and several important provisions which contain all the aspects of taxation in India. 

Now, the nature of the Income Tax Act 1961 can be classified into – direct and indirect taxes. The taxpayer must pay direct taxes at a certain percentage based on his/her income. While the latter is levied by the government indirectly during the sale of goods and services. 

Chapters of the Income Tax Act 1961

The Income Tax Act has 23 chapters in total, some of which have subparts. Find them mentioned in the table below:

Chapter IAn introduction of the Income Tax Act and its overview. 
Chapter IIThe beginning and scope of the IT Act. 
Chapter IIIIncome that does not form a part of the total income. 
Chapter IVHow is total income calculated?
Chapter VOther income sources of individuals which form a part of the assessee’s income, like capital gains, businesses, properties and more. 
Chapter VIAggregation of income, carry forward of loss and set off.  
Chapter VIADeductions applicable while calculating total income. 
Chapter VIBRestriction on specific deductions for companies. 
Chapter VIIParts of total income on which income tax is not applicable. 
Chapter VIIIApplicable rebates and reliefs while calculating income tax. 
Chapter IXContains information on double taxation relief. 
Chapter XSpecial cases in which assessees do not have to pay income tax. 
Chapter XAGeneral anti-avoidance rules for income tax. 
Chapter XIAdditional tax implications on undistributed profits. 
Chapter XIIRules of tax calculation in special cases. 
Chapter XIIASpecial rules on certain Non-Resident Indian (NRI) income.  
Chapter XIIB Special tax provisions for certain companies. 
Chapter XIIBASpecial tax provisions for certain limited liability partnerships.
Chapter XIIBBSpecial tax rules when the Indian branch of a foreign bank gets converted to a subsidiary company. 
Chapter XIIBCSpecial tax rules for companies which are resident in India. 
Chapter XIICSpecial tax rules for retail trade. 
Chapter XIIDSpecial tax rules for the distributed profits of domestic companies. 
Chapter XII DASpecial tax rules for the distributed income of domestic companies for buying back shares.
Chapter XIIESpecial tax rules for distributed income
Chapter XIIEASpecial tax rules for distributed income by securitisation trusts. 
Chapter XIIEBSpecial tax rules for accredited income of specific institutions and trusts. 
Chapter XIIFSpecial tax rules for income from venture capital funds and venture capital companies. 
Chapter XIIFASpecial tax rules for business trusts.
Chapter XIIFBSpecial tax rules for the income of investment fund schemes and the income received from them. 
Chapter XIIGSpecial tax rules for the income of shipping organisations. 
Chapter XIIHTax implications on fringe benefits. 
Chapter XIIIInformation of Income Tax Authorities. 
Chapter XIVProcedure of income tax assessment. 
Chapter XIVASpecial rules for avoiding repeated appeals. 
Chapter XIVBSpecial rules for assessing search cases. 
Chapter XVTax liabilities in special cases. 
Chapter XVISpecial tax rules applicable to firms. 
Chapter XVIIRules of tax collection and recovery. 
Chapter XVIIITax relief on dividend income in specific cases. 
Chapter XIXTax Refunds. 
Chapter XIXACase settlements.  
Chapter XIX-AARole of Dispute Resolution Committee in specific cases. 
Chapter XIXBAdvance rulings.
Chapter XXAppeals and revision.
Chapter XXAImmovable property acquisition in special cases of transfer to prevent tax evasion. 
Chapter XXBMode of accepting payments or repayments in special cases in order to counteract tax evasion. 
Chapter XXC Buying of immovable property by the central government in certain transfer cases. 
Chapter XXIImposable penalties.
Chapter XXIPunishable offences and prosecutions.
Chapter XXIBCertificates of tax credit. 
Chapter XXIIIMiscellaneous. 

To get further details on the contents of each chapter, you can download the Income Tax Act 1961 PDF from the Income Tax Department’s official website.  

Main Objectives of Income Tax Act 1961

The main objectives of the Income Tax Act 1961 are as follows:

  • Price Stability

The IT Act maintains price stability in the economy by laying out regulations for direct taxes. It serves as a measure to control private spending, thereby keeping a check on the inflation of commodity prices.  

  • Full Employment 

This Act reduces the income tax rates in order to promote higher demand for goods and services. This, in turn, leads to increased employment opportunities, thus fulfilling the objective of full employment. 

  • Non-Revenue Objective

A higher tax rate is applicable for wealthy people compared to the poor. In this way, the Income Tax Act encourages a progressive taxation system that addresses the inequality in wealth among its citizens, carrying out its non-revenue objective. 

  • Cyclical Fluctuations Control

When there is an economic boom, the income tax rates are increased, while in times of recession, it is reduced. In this way, the Act maintains control over cyclical fluctuations in the value of money. 

  • Reducing Balance of Payment Issues

The Income Tax Act imposes customs duties on the import of certain goods. This helps encourage the domestic production of goods, thereby reducing the balance of payment difficulties for the authorities.   

Scope of Income Tax Act 1961

The scope or extent of tax implications under the Income Tax Act 1961 depends upon the assessee’s residential status:

Income Type                                        Residential Status
 Resident and Ordinarily Resident (ROR)

Resident but not-Ordinarily Resident




Income received or deemed to be received in India TaxableTaxableTaxable
Accrued income in IndiaTaxableTaxableTaxable
Income accrues from outside India, but the profession or business is inside the country.TaxableTaxableNon-taxable
Income accrues from outside India, but the profession or business is outside the country.TaxableNon-taxableNon-taxable
The untaxed past foreign income brought into the country.Non-taxableNon-taxableNon-taxable

Features of Income Tax Act 1961

Some of the salient features of the Income Tax Act 1961 are as follows:

  • Income tax is a form of direct tax that needs to be borne by the taxpayer. It cannot be transferred to another individual. 
  • The Central Government of India controls this form of taxation. 
  • It is applicable to the taxpayer's income which was earned in the previous year. 
  • Tax calculation is applicable based on the assessee’s income tax slab. 
  • The government levies a progressive income tax rate so that rich and economically powerful individuals have to pay taxes at higher rates. 
  • Deductions apply to a maximum limit per financial year in certain cases. 

Provisions of Income Tax Act 1961

There are several provisions in the Income Tax Act 1961. Some of the notable ones are:

  • Appeal under Section 260A to the High Court and Section 261 to the Supreme Court 
  • Annual information and financial transaction statement
  • Appearance by an authorised representative
  • Income taxability
  • Undertaking transactions mode
  • Assessing tax authorities
  • Instructions to subordinate authorities
  • Appeal application for reference by the Income Tax Officer

Final Word

Now that you have a clear idea of the Income Tax Act 1961, you can understand how the Income Tax Department works. Furthermore, you can take a look at the different sections in order to learn the various available deductions. This will help you make smarter investments and gain tax savings. 

Frequently Asked Questions

Who introduced the first Income Tax Act in India?

Ans. Sir James Wilson introduced the first Income Tax Act in India in February 1860. He was British India's first Finance Minister.  

How many sections are there in the Income Tax Act 1961?

Ans. There are 298 sections and 23 chapters in the Income Tax Act. Some of the most important sections are Section 80C, Section 80CCD, Section 80CCC, Section 80TTA and Section 80TTB. 

What are the main objectives of the Income Tax Act 1961?

Ans. The main objectives of the Income Tax Act are promoting price stability, full employment, economic development, reduction of BOP difficulties, controlling cyclical fluctuations and non-revenue objectives. 

About the Author

A manager by day and a sloth by night. I enjoy writing on topics like personal finance and investments. With 10 years of experience in fintech, creating content that resonates with readers is my forte. Read more


Quick Summary

The Income Tax Act 1961 outlines taxation rules in India. It has 298 sections and 23 chapters covering direct and indirect taxes. Objectives include price stability, full employment, and reducing wealth inequality. Scope depends on residency status. Key features include direct taxation, progressive tax rates, and deductions. Notable provisions include appeal processes and income taxability. Sir James Wilson introduced the first Income Tax Act in India in 1860.

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