What Is Income Tax?

Understanding Income Tax

Income tax is a tax imposed by governments on the income generated by individuals, businesses, or other entities within their jurisdiction.

Income tax can be levied on various types of income, including:

1. Wages and Salaries: Income earned from employment, including wages, salaries, bonuses, commissions, and tips.

2. Business Profits: Income generated by businesses from their operations, including profits from sales, services, investments, and other business activities.

3. Investment Income: Income earned from investments such as interest, dividends, capital gains, rental income, and royalties.

4. Self-Employment Income: Income earned by self-employed individuals, freelancers, contractors, and entrepreneurs from their business activities.

5. Pensions and Retirement Income: Income received from pensions, retirement accounts, annuities, Social Security benefits, and other retirement sources.