Direct taxation in India is a system of collecting taxes directly from individuals or other taxpayers on the basis of their personal income and wealth. The tax is collected through formal financial and government-recognized channels.
Information and identification details such as the Permanent Account Number (PAN) and bank account details may be used in the formal tax system for identifying taxpayers and maintaining tax-related records.
Definition of Direct Tax under the Central Boards of Revenue Act, 1963
Section 2(c) of the Central Boards of Revenue Act, 1963 defines the term Direct Tax.
According to the Act, direct tax includes any duty leviable or tax chargeable under specified tax laws. These laws include:
- Estate Duty Act, 1953
- Wealth-tax Act, 1957
- Expenditure-tax Act, 1957
- Gift-tax Act, 1958
- Income-tax Act, 1961
- Super Profits Tax Act, 1963
The definition of direct tax is not limited only to taxes imposed under these specified Acts. It also includes any other duty or tax which, considering its nature or incidence, is declared by the Central Government to be a direct tax.
Such declaration must be made by the Central Government through a notification published in the Official Gazette.
Therefore, under the Central Boards of Revenue Act, 1963, a tax may be treated as a direct tax either because it is specifically covered under the specified tax laws or because it is declared as a direct tax by the Central Government based on its nature or incidence.
Key Exam Points
Section 2(c) of the Central Boards of Revenue Act, 1963 defines Direct Tax.
Direct taxation in India is related to the collection of tax based on the income and wealth of taxpayers through formal channels.
The definition includes taxes and duties chargeable under specified Acts, including the Income-tax Act, 1961.
The Central Government can declare any other duty or tax as a direct tax after considering its nature or incidence.
Such declaration is made through a notification in the Official Gazette.