Income Tax Act 1961: Income Tax Laws, Sections & Explanation

byDilip PrasadSeptember 28, 2023
How to Check Income Tax Refund Status Online?

Income Tax Act is one of the prominent forms of tax that is payable to the Government on the basis of one’s income. It is utilised by the Government for public welfare like infrastructure development, subsidies, defence funding and more. This direct tax falls under the Income Tax Act of 1961 and must be paid if your income is eligible for the same. Understanding the Income Tax Act requires having a firm understanding of numerous chapters and sections containing rules and regulations. This article explains all these laws with important sections, which you must know as a taxpayer.

What is the Income Tax Act?

The Income Tax Act was passed in the year 1961 with the aim of achieving economic development in the country. The act comprises a comprehensive set of chapters that ensure the compliance of tax regulations of the country. This tax is levied on the taxpayer’s annual income as per the slabs recommended each year. Depending on the applicability of the slab rate, the tax is levied on the taxable income. The Indian Government makes amendments to the Income Tax Act every year in February. It is therefore recommended that one must always check the current updates on the slabs and other laws associated with income tax, on the official portal. 

Which Income is Taxable Under the Income Tax Act?

The Income Tax Act has defined the sources of income that are taxable as per IT Act 1961. These are:

  • Income from salaries
  • Income from profits of business and profession
  • Income from capital gains (sale of capital assets)
  • Income from house property
  • Income from other sources stated in Section 56 of the Act

Who is Liable to Pay Income Tax?

If your annual income exceeds 2.5 lakhs then you are entitled to pay income tax. Here are all the people who are eligible to pay income tax:

  • Body of Individuals (BOI)
  • Hindu Undivided Family (HUF)
  • Companies
  • Corporate firms
  • Artificial Juridical Persons
  • Associations of Persons (AOP)
  • Local bodies

Also Read: How to Check Income Tax Refund Status Online?

List of Income Tax Chapters 

Also Read: Income Tax Portal

Important Sections of the Income Tax Act 1961

Out of all the sections in the numerous chapters of the IT Act 1961, there are five important sections which every taxpayer must know. These are discussed below:

  • Section 80C – Tax deduction on investments: Section 80C of the Income Tax Act permits deductions for specific investments like Tax Saving Mutual Funds and Tax Saving Fixed Deposits.
  • Section 80CCC – Tax deduction for contribution to pension funds: Section 80CCC promotes pension fund investments by allowing an income tax deduction from the taxpayer’s gross total income for the respective financial year. 
  • Section 80CCD – Tax deduction for contribution to National Pension Scheme: Section 80CCD offers tax deductions for National Pension Scheme (NPS) contributions. Every sub-section under this section allows for unique deductions, which every taxpayer must know. 
  • Section 80TTA – Tax deduction for interest on savings account: According to Section 80TTA of the Income Tax Act (Chapter VI-A), individuals can avail of deductions of up to INR 10,000 annually from the interest earned on savings account deposits held in post offices, banks or cooperative societies.
  • Section 80TTB – Tax deduction on interest income for senior citizens: Under Section 80TTB of the Income Tax Act, senior citizens aged 60 and above can claim tax deductions on interest income from their deposits. The maximum deduction permitted in a financial year is INR 50,000.

Also Read: How to Calculate Taxable Income on Salary?


The Income Tax Act 1961 is a comprehensive income taxation act under the Ministry of Finance. The act is applicable to all salaried individuals, businesses, corporations, Hindu Undivided families and others mentioned above for an annual income above INR 2.5 lakhs. The IT Act consists of numerous chapters and sections that we have listed above, with details on each section’s explanation.


What amount do I have to pay as an income tax on my salary?

The amount of income tax you will pay depends on your taxable income and the applicable tax slab. Taxable income is calculated by deducting eligible deductions from your gross income.

How does the government collect income tax?

The government collects taxes through three methods: Voluntary payments made by taxpayers to designated banks, such as advance tax and self-assessment tax Taxes deducted at source (TDS) from the recipient’s income Taxes collected at source (TCS)

Is agricultural income taxable?

Agricultural income is generally not taxable as per the Income Tax Act. However, if you also have non-agricultural income, your agricultural income will be considered in determining the tax rate applicable to your non-agricultural income.
You can reach out to the tax professionals at the Public Relations Officer (PRO) in your local Income Tax Department in case of any doubts. You can also get help from the Tax return Preparers (TRPs) at your nearest location.

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