1.Context
An analysis of firms which feature among the top purchasers of electoral bonds throws up many curious patterns. One of the common links is that a significant number of companies in the top donor list were under the scanner of the Enforcement Directorate or the Income Tax (I-T) Department at some point of time in the past five years
2.Income Tax
The term “income tax” refers to a type of tax that governments impose on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations.
3.History of Tax
- The United States imposed the nation's first income tax in 1862 to help finance the Civil War. After the war, the tax was repealed, but it was reinstated after the passage of the Revenue Act of 1913. That same year, Form 1040 was introduced.
- Most countries, including the U.S., employ a progressive income tax system in which higher-income earners pay a higher tax rate compared with their lower-income counterparts. The idea behind the progressive tax is that those who earn high incomes can afford to pay more taxes. In 2022, federal income tax rates range from 10% to 37%.
4.Purpose of Tax
Income taxes are a source of revenue for governments. They are used to fund public services, pay government obligations, and provide goods for citizens.
The personal income tax that the government collects can help fund government programs and services, such as Social Security, national security, schools, and roads
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Investment exempted from Income Tax Certain investments, like housing authority bonds, tend to be exempt from income taxes |
5.Types of Income Tax
Individual income tax is also referred to as personal income tax. This type of income tax is levied on an individual’s wages, salaries, and other types of income. This tax is usually a tax that the state imposes.
Businesses also pay income taxes on their earnings. Depending on the business structure, the corporation, its owners, or shareholders report their business income and then deduct their operating and capital expenses.
State income tax is a direct tax levied by a state on income earned in or from the state
5.4.What percent of income is taxed
The percent of your income that is taxed depends on how much you earn and your filing status. In theory, the more you earn, the more you pay.
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For Mains: 1.Discuss the various modes of generation of income tax. |
