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What organisation regulates income tax in India and what is its responsibility?

In India, direct taxes are regulated by the Income Tax Department under the Central government. The department falls under the Finance Ministry’s Department of Revenue, and is responsible for the collection of income tax across the country. The apex body in the Income Tax Department is the Central Board of Direct Taxes (CBDT) which has regional headquarters established in different parts of the country which oversee duties in that part of the country. The Income Tax Department regulates all matters relating to taxation applicable on different investments. 

The primary responsibilities of the Income Tax Department are listed below:

  • Enforcing Tax Laws: In India, tax laws are enforced by the Income Tax Department, of which the most important is the Income Tax Act, 1961. The task of enforcing tax laws include them setting up knowledge sessions with various stakeholders and ensuring implementation at an administrative level. To ensure compliance from taxpayers, the department performs assessment which is a process that helps in the correct estimation of taxes payable as well as to detect non-compliance. Additionally, the department can perform search and seizure activities on residential and official premises of non-compliant taxpayers or of those evading taxes. The Income Tax Department also draws power from its ability to prosecute those who are willfully evading payment of taxes. This department also enforces other financial laws including the Black Money Act, 2015 and the Benami Transactions (Prohibition) Act, 1988.

  • Collect Government Revenue: The government’s primary source of revenue is through tax collection, and the Income Tax Department is the apex body for tax collection. It ensures compliance from taxpayers and ensures the government receives the due revenue. The department levies taxes on individuals, companies, firms, societies, local authorities, and even artificial judicial persons. Furthermore, the generation of taxes from international professionals and companies are also regulated and ensured by the department.

  • Enforce other Taxation Laws: Aside from laws relating to income tax, the department also takes responsibility for enforcing Double Taxation Avoidance Agreements. International taxation agreements relating to transfer pricing are also under the purview of the Income Tax Department. Its responsibilities also include utilising its power to deal with repeat non-compliance from taxpayers through the implementation of rules such as the General Anti-Avoidance Rules.

The Income Tax Department is the primary authority for the implementation of laws relating to taxation, and especially with regards to income tax. Through this body’s actions, the government is assured of a regular income through its measures for generation and collection of revenue.

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