A STUDY ON

INDIAN TAX SYSTEM PROBLEMS AND ISSUES

With reference to

INCOME TAX IN INDIA

PROJECT REPORT SUBMITTED TO THE

DEPARTMENT OF COMMERCE AND BUSINESS

ADMINISTRATION

ACHARYA NAGARJUNA UNIVERSITY

in the partial fulfilment for the award of degree of

MASTER OF COMMERCE

submitted by
MUDDANA DEEPIKA

M.COM [ IV SEMESTER ]

Y23CO20027
under the guidance of
Dr. GOLI NAGARAJU

M.COM., M.B.A., M.Phil., Ph.D,

Department of Commerce & Administation

ACHARYA NAGARJUNA UNIVERSITY

NAGRJUNA NAGAR, GUNTUR,

ANDHRA PRADESH, INDIA - 522 510

2024
 DECLARATION
I hereby declared that this project report entitled "INDIAN TAX
SYSTEM PROBLEMS AND ISSUES WITH REFERENCE TO INCOME TAX IN INDIA" is a
bonified work done by me for the award of degree of " Master of Commerce " from
Acharya Nagarjuna University,
done under the esteemed guidance of Dr. GOLI NAGARAJU, faculty of Department
of Commerce and Business Administration, during the acadamic years 2022-2024
I also declare that this project is a result of my own efforts and that it
has not been submitted to any other university or institution for the award of any
degree or diploma

PLACE : MUDDANA DEEPIKA

DATE : [REG NO: Y23C020027]
 ACKNOWLEDGEMENTS

I would also like to thank Dr. GOLI NAGARAJU, Faculty of

Department of commerce & Business Administration, for his valuable guidance and
support for the completion of my project work and helping me throughout .

I also thankful to Dr. NAGARAJU BATTU, Dean & head of the Dpartment
of Commerce & Business Administration for giving me the opportunity to take up
the project work and helping me throughout.

First and foremost , I am thankful to PROF. P. VARAPRASAD MURTHY,

Principle, Acharya Nagarjuna University college of arts, Commerce and Law, for
giving permission for taking up my project.

I would also like to thank all my staff members in department of

Commerce and Business Administation ANU for their support.

Finally, I express my sincere thanks nto all those who helped me directly or
indirectly through my project work.

MUDDANA DEEPIKA
[Regd No: Y23C020027]
 TOPIC

INDIAN TAX SYSTEM PROBLEMS AND ISSUES

INDEX

S.N0 CHAPTERS PAGE NO

1 INTRODUCTION
2 OBECTIVES AND METHODOLOGY
3 INDIAN TAX SYSTEM CONCEPTUAL AND PROBLEMS
&ISSUES
4 ANALYSIS OF DATA
5 SUMMARY AND CONCLUSION
CHAPTER 1
 Introduction

Definition

“A direct tax is really paid by a person on whom it is legally imposed.” So, a direct tax is one
whose impact and incidence are on the same person, i.e. the tax payer is also the tax-bearer. The tax
burden cannot be shifted on others and these taxes are to be paid directly to the government.
According to Dalton

History of Income Tax

After understanding what is income tax in India, it is also important to be aware of the
history of income tax, i.e., when and by whom was it first introduced and more.

Initially, levying taxes was one way of making up for the losses incurred by the Government due to the
Military Mutiny of 1857. Sir James Wilson introduced taxes in 1860. Several modifications have been made
to the concept ever since.

In 1886, a special act, i.e., the Income Tax Act, was passed. This act remained for several years, with
amendments from time to time. A fresh Income Tax Act was passed in 1981, which was then replaced by
another act in 1922. This continued until a new act was passed yet again in the financial year 1960-61.

The Income Tax Act 1961 was implemented from the 1st of April 1962. This act applied to the entire
country, including Sikkim, Jammu, and Kashmir. However, the Union Budget has made several amendments
to the Income Tax Act 1961, though it remains relevant to date.

Meaning of Income tax

Income tax is significant in a country's financial landscape. Now, what is income tax in India?
Income tax is the tax paid on the income earned in a financial year by individuals or businesses. The Income
Tax Act 1961governs the income tax system in India.

Every individual and business is expected to file income tax within the stipulated period wherein they
report their income and claim refunds wherever applicable. Tax filing has been made simple with the online
tax filing provision. You can visit the official website of the Income Tax Department or any verified third-
party websites and file the return from the comfort of your home.

The set of rules and regulations stipulated by the Government according to which the Income Tax
Department levies, collects, and recovers taxes. The Income Tax Act 1961,which came into force on 1st
April 1962, continues to date.

There are 298 Sections, 23 chapters, and several provisions that cover the various aspects of taxation in
India and define what is income tax in India.
 History of Income Tax

After understanding what is income tax in India, it is also important to be aware of the history
of income tax, i.e., when and by whom was it first introduced and more.

Initially, levying taxes was one way of making up for the losses incurred by the Government
due to the Military Mutiny of 1857. Sir James Wilson introduced taxes in 1860. Several modifications have
been made to the concept ever since.

In 1886, a special act, i.e., the Income Tax Act, was passed. This act remained for several
years, with amendments from time to time. A fresh Income Tax Act was passed in 1981, which was then
replaced by another act in 1922. This continued until a new act was passed yet again in the financial year
1960-61.

The Income Tax Act 1961 was implemented from the 1st of April 1962. This act applied to the
entire country, including Sikkim, Jammu, and Kashmir. However, the Union Budget has made several
amendments to the Income Tax Act1961, though it remains relevant to date.

Who is Eligible to Pay Income Tax in India?

Besides knowing the income tax meaning, it is important to also understand who can pay income
tax in India. Income-tax is to be paid by every person. The term ‘person’ as defined under the Income-tax
Act includes natural as well as artificial person.

The following are Eligible person to pay income tax in India:

•Individuals

•Firms

•Companies

•Artificial Judicial Person

•Association of Persons

•Body of Individuals

•Hindu Undivided Family (HUF)

•Companies

1. Individual

An individual is a person who is taxed as an individual entity. An individual may be a resident or

a non-resident of India. A resident individual is taxed on their global income, whereas a non-resident
individual is taxed only on their Indian income.
 2. Hindu Undivided Family(HUF):

An HUF is a separate tax entity consisting of all persons in a family.

who are lineally descended from a common ancestor. The income of the HUF is taxed separately
from the income of its members.

3. Firm:
A firm is an association of persons who carry on a business together with a view to making a
profit. The income of a firm is taxed as a separate entity, and the partners are taxed on their share
of the profits.

4. Company:
A company is a legal entity that is separate from its shareholders. The income of a company is
taxed separately from the income of its shareholders

5. Association of Person [AOP]

An AOP is an association of two or more persons who come together to carry on a
business or profession. The income of an AOP is taxed separately from the income of its members.

6. Body of Individua (BOI):

A BOI is a group of individuals who come together for a common purpose, such as to receive
income from a property. The income of a BOI is taxed separately from the income of its members.

7. Local Authority:

A local authority is a legally constituted body that is responsible for the administration of a particular
area or locality. The income of a local authority is taxed separately from the income of its members.

8. Artificial Juridical Person(AJP):

An AJP is an entity that is not a person in the ordinary sense, but is treated as a person for the
purposes of taxation. This includes entities such as trusts, funds, and other similar entities.

In conclusion, the Income Tax Act provides for different types of person who are subject to tax
in India. The tax liability of each type of assessee varies depending on their status, nature of income and
other factors. It is important for taxpayers to be aware of their status and their tax obligations under the
Act to ensure compliance with the law.