Section 4 Charge of income-tax.

Income-tax Act, 2025 [As Passed]

At a Glance

Document: Clause 4 of the Income Tax Bill, 2025 (Old Version) - provision establishing the charge of income-tax. It sets out the basis on which income-tax is to be charged, the taxable base (total income of the tax year), inclusion of additional income-tax, treatment of non-tax-year periods, and obligations for deduction/collection/advance payment. It affects all taxpayers and the tax administration. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 4 is located in Chapter II ("Basis of Charge") of the Income Tax Bill, 2025 (Old Version). It articulates the foundational charge rule that links the rate-setting function (a Central Act enacting rates for a tax year) with the charging mechanism under this Bill. Definitions beyond the text of Clause 4 (for example, definitions of "tax year", "person", or procedural provisions) are not contained within Clause 4 and therefore: Not stated in the document.

Clause 4 explicitly covers: (i) the triggering of rates enacted by a Central Act; (ii) that charge is on total income of the tax year of every person; (iii) that "income-tax" includes any additional income-tax, by whatever name called; (iv) charging in respect of income of periods other than the tax year where the Act so provides; and (v) obligations for deduction/collection at source or advance payment in respect of chargeable income.

Statutory Provision Mode

Text & Scope

Clause 4 sets out the charge of income-tax in five sub-clauses:

• Sub-clause (1): Income-tax for any tax year shall be charged according to the Act at rates enacted by a Central Act for that tax year. The provision links rate determination (a Central Act) with charging under this Bill.

• Sub-clause (2): The charge under sub-clause (1) is on the total income of the tax year of every person as per this Act.

• Sub-clause (3): Income-tax also includes any additional income-tax, by whatever name called, levied under this Act.

• Sub-clause (4): If the Act provides charge in respect of income of a period other than the tax year, income-tax shall be charged accordingly.

• Sub-clause (5): For the income chargeable under sub-clause (2), income-tax shall be deducted or collected at source or paid in advance as provided under this Act.

Coverage: persons liable to tax (term "every person" used) and the mechanism by which the charge applies. The provision is foundational; operational details (rates, computation rules, exemptions, assessments, appeals, procedural mechanisms) are outside Clause 4 and: Not stated in the document.

Interpretation

Legislative intent and interpretive signals present in the text include:

• A linkage between rate-setting (Central Act) and the charging operation under the Bill - the Bill does not itself set rates for tax years but gives effect to rates enacted by Central Act.

• Taxable base is expressed in aggregate language ("total income of the tax year of every person"), indicating a comprehensive annual basis of charge rather than, for example, a transactional levy.

• Inclusion of "additional income-tax" by whatever name called appears designed to encompass levy labels and avoid form-based avoidance.

• Provision for periods other than tax year signals legislative flexibility to allow charging on other accounting or specified periods where the Act so provides.

Beyond these textual cues, legislative purpose, policy rationales, and explanatory memorandum content: Not stated in the document.

Exceptions/Provisos

Clause 4 contains no explicit provisos or exceptions. It does not specify exclusions, thresholds, or special categories (e.g., non-residents, charitable institutions). Those matters are addressed elsewhere in the Bill or other laws: Not stated in the document.

Illustrations

• Example 1: A resident individual's total income for tax year 2025-26 is computed under the Act. The Central Act enacts rates for 2025-26; income-tax is charged on that total income at those rates and is subject to deduction at source or advance payment as prescribed.

• Example 2: The Act provides for charging tax on a specified accounting period (e.g., a fiscal quarter) for certain entities. Under sub-clause (4), where the Act so provides, income-tax shall be charged in respect of that period rather than the tax year.

Interplay

Clause 4 cross-references to rate-setting by a Central Act and anticipates other provisions of the Bill dealing with computation, withholding, and advance payment. However, specific Rules/Notifications/Circulars or other sections that modify or implement Clause 4 are not cited in the text: Not stated in the document. The provision establishes a high-level interaction between (a) the Central Act that enacts rates and (b) the Bill that sets charge mechanics; further operational interplay is governed by other provisions external to Clause 4.

Differences Between Section 4 (Income-tax Act, 2025 [As Passed]) and Clause 4 (Income Tax Bill, 2025 - Old Version) and Practical Impact

• Wording and grammatical re-ordering in sub-section (1):

  Old Bill: "Income-tax for any tax year shall be charged as per the provisions of this Act at the rate or rates which are enacted by a Central Act for such tax year."

  Passed Act: "Where any Central Act enacts that income-tax shall be charged for any tax year at any rate or rates, income-tax for such tax year shall be charged at that rate or those rates in accordance with and subject to the provisions of this Act."

  Practical impact: Purely stylistic/clarificatory. The Passed Act places primacy on the Central Act's enactment as the triggering event and clarifies that the charge must be in accordance with this Act. No substantive change to the legal effect is apparent.

• Difference in cross-reference in sub-section (5):

  Old Bill: "For the income chargeable under sub-section (2), income-tax shall be deducted or collected at source or paid in advance as provided under this Act."

  Passed Act: "For the income chargeable under this section, income-tax shall be deducted or collected at source or paid in advance as provided under this Act."

  Practical impact: The Passed Act broadens the cross-reference from "sub-section (2)" (which refers to charge on total income of the tax year) to "this section" (which includes charging on other periods under subsection (4) as well). This is a minor but potentially meaningful drafting clarification: withholding/deduction/advance payment obligations are linked to all income chargeable u/s 4 (including income of periods other than the tax year), avoiding any unintended limitation to only tax-year charges. Functionally, it clarifies the scope of withholding/advance payment obligations, potentially preventing interpretive disputes.

• Other differences:

  The two texts are otherwise substantially the same: both (a) impose a charge of income-tax at rates enacted by Central Act; (b) state charge is on total income of the tax year of every person; (c) include "income-tax" to encompass additional income-tax by whatever name called; and (d) provide charging for periods other than tax year where provided.

  Practical impact: No substantive change in core charging mechanism. Changes are drafting clarifications that may aid interpretation and application but do not introduce new concepts or taxpayer obligations beyond existing structure.

Practical Implications

• Compliance and risk areas: Clause 4 confirms that income-tax liability arises on the computation of total income for the tax year, and that withholding/collection/advance payment duties attach to chargeable income. Practical compliance therefore depends on the correct identification of the tax year, accurate computation of "total income" (as defined elsewhere), and adherence to withholding and advance payment schedules specified in other provisions.
• Record-keeping/evidence points: Although Clause 4 does not prescribe documentation, its emphasis on deduction/collection and advance payment implies taxpayers and withholding agents should maintain records supporting computation of total income, bases for withholding, dates and amounts of advance payments, and any alternative period-based computations if the Act permits charging for non-tax-year periods. Specific documentary requirements: Not stated in the document.

Key Takeaways

• Clause 4 establishes the foundational charge of income-tax tied to rates enacted by a Central Act.
• The taxable base is the "total income of the tax year of every person" unless the Act provides otherwise.
• "Income-tax" is defined inclusively to cover any additional income-tax regardless of name.
• The Clause permits charging on periods other than the tax year where expressly provided by the Act.
• Withholding, collection at source and advance payment obligations apply to income chargeable under the Clause (specific procedures are provided elsewhere).
• The Old Bill's language is substantively similar to the Passed Act; the key drafting difference concerns the cross-reference in the withholding/advance-payment sub-clause.
• Operational details, definitions, effective date, and legislative history are not contained in Clause 4: Not stated in the document.

Full Text:

Section 4 Charge of income-tax.