Section 4 of ITA, 1961 : Section 4: Charge Of Income-Tax

Explanation using Example

Imagine that Mr. Sharma is an employee at a software company and earns a salary. According to the Income-tax Act of 1961, his income for the financial year 2022-2023 is subject to income-tax. The Central Government has announced that the income-tax rate for individuals for the assessment year 2023-2024 is 10% for income up to Rs. 5,00,000, 20% for income between Rs. 5,00,000 and Rs. 10,00,000, and 30% for income above Rs. 10,00,000.

Mr. Sharma's total income in the previous year (2022-2023) was Rs. 8,00,000. As per Section 4 of the Income-tax Act, he must pay income-tax at the rates specified for the assessment year 2023-2024. His employer will also deduct income-tax at the source from his salary every month during the financial year 2022-2023, based on these rates, which is a practical application of sub-section (2) of Section 4.