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Q.1 – What is Income Tax? Discuss the historical development of Income Tax law in India. A. Meaning of Income Tax Income Tax is a direct tax imposed by the Central Government on the income of individuals, Hindu Undivided Families (HUFs), firms, companies, associations, and other persons . It is charged on the total income earned during a previous year . The levy and collection are governed by the Income-tax Act, 1961 . It follows the principle of “ability to pay” – higher the income, higher the tax. It is an annual tax , calculated on residential status and nature of income. Definition of Income Tax Although the Act does not define “Income Tax,” it imposes it under: Section 4 : Charge of Income Tax Section 5 : Scope of total income Section 2(24) : Broad meaning of income Thus, Income Tax = tax imposed on income as defined under the Income-tax Act, 1961. Historical Development of Income Tax Law in India The development of income tax in India took place in diff...