When we talk about the Income Tax Act, 1961, there's one section that lays the very foundation of the entire law — Section 4. This section is famously termed as the charging section of income tax. It is not just a piece of legal text; it is the very reason income tax exists in India today. Whether you're a salaried individual, a business owner, or an investor — your obligation to pay tax stems from this core provision.
But what exactly does it mean when we say something is a "charging section"? Why is Section 4 considered so crucial? And how does it operate in real life?
Let’s break it all down in a way that’s simple & structured.
What Is a Charging Section?
In tax law, a charging section is the part of legislation that "provides for the charge of income tax on the total income of a taxpayer." In simpler terms, unless a charging section exists, the government cannot legally levy tax — no matter how much income a person earns.
The charging section authorizes the tax. It tells us who is liable, on what income, and under what conditions. Without it, the rest of the Income Tax Act would have no binding force on taxpayers."
Hence, it's rightly said:
“Section 4 is a charging section and it is the backbone of the income tax act.”
Section 4 of Income Tax Act: Explained
Now that we know what a charging section means, let’s look at what Section 4 says in essence:
Section 4(1): Income-tax shall be charged for any assessment year in respect of the total income of the previous year of every person at the rates prescribed.
This line might look simple, but it’s doing a heavy job. It’s saying:
- Income tax will be charged every year.
- It applies to every person (as defined in Section 2(31)).
- The tax is on the total income (as computed under the Act).
- And it will be levied at rates specified in the Finance Act or the Income Tax Act.
Why Is Section 4 Called the Backbone of the Income Tax Act?
Let’s say the law had sections on how to compute income, how to claim deductions, or when to file returns, but didn’t have any section stating that tax is to be levied in the first place.
That’s like building a house without laying the foundation.
Section 4 is that foundation. It is not only the first step in any tax assessment, but also the legal basis for the Income Tax Department to even issue notices, assessments, or raise demands.
Also Read: Section 2(31) of Income Tax Act: Meaning, Definition & Key Insights
Types of Income Covered Under the Charging Section
Section 4 doesn’t specify income heads. Instead, it refers to “total income”. But the Act elsewhere classifies total income into 5 heads:
- Income from Salary
- Income from House Property
- Profits and Gains of Business or Profession
- Capital Gains
- Income from Other Sources
Each head has its own mini-charging section. For example:
- Section 15 for salary
- Section 22 for house property
- Section 28 for business income
Section 4 vs. Procedural Sections
It’s important to know that not all sections in the Income Tax Act charge tax. Some are merely procedural — they talk about how to compute, deduct, or refund tax.
For example:
- Section 139 talks about filing returns.
- Section 192 deals with TDS on salary.
- Section 234 covers interest and penalties.
But none of these can stand without Section 4.
Without a charging section, procedural sections have no legal teeth. That’s why every notice or assessment begins with the base assumption — that income is chargeable under Section 4."
Also Read: The Interest Penalty That Silently Drains Your Refund
Why You Should Know Section 4
Whether you’re:
- Filing your return
- Receiving a notice
- Preparing for a tax exam
- Learning how the law works
…your understanding should start with Section 4.
It is the charging section of income tax and the legal lifeline of the entire taxation system. Every taxpayer, CA, consultant, or business owner must know what it does — because everything else in the Act revolves around it.
Want help with tax filing, notices, or understanding how income is charged under the Income Tax Act? Our expert CAs at Callmyca.com can assist you in navigating everything — from Section 4 to your final tax computation.
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