Basis Of Charge Of Income Tax

Overview of the Basis of Charge of Income Tax

1. Legislation:

The primary basis of charge for income tax is established through legislation enacted by the government.

This legislation typically takes the form of an Income Tax Act or Code, which sets out the legal framework for imposing and administering income tax.

2. Legal Authority:

The government derives its authority to levy income tax from the Constitution or other enabling statutes that empower it to impose taxes for the purpose of raising revenue and funding public expenditures.

3. Scope of Taxation:

The basis of charge defines the scope of income subject to taxation, including the types of income, sources of income, and categories of taxpayers that are subject to tax.

4. Residency and Source Principles:

The basis of charge may incorporate principles of residency and source to determine the tax liability of individuals and entities. 

Residency principles determine the tax liability of residents based on their worldwide income, while source principles determine the tax liability of non-residents based on income sourced within the jurisdiction.

5. Taxable Events:

The basis of charge identifies the taxable events or triggers that give rise to the imposition of income tax liability, such as the receipt of income, realization of gains, or occurrence of specific transactions or events.

6. Tax Rates and Thresholds:

The basis of charge establishes the tax rates, tax brackets, thresholds, exemptions, deductions, credits, and other provisions that determine the amount of tax payable by taxpayers based on their income levels and other relevant factors.

7. Compliance and Enforcement:

The basis of charge also outlines the compliance requirements, administrative procedures, and enforcement mechanisms for ensuring that taxpayers fulfill their tax obligations and that tax laws are effectively administered and enforced by tax authorities.