Section 4: charge of income-tax

Introduction

Section 4 is the charging provision: when a Central Act sets rates for a tax year, tax is charged on every person's total income under the 2025 Act. It also recognises additional income tax and expressly prescribed nonstandard income periods.

Key takeaways

What Section 4 says

"(1) 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."

"(2) The charge of income-tax under sub-section (1) shall be on the total income of the tax year of every person as per the provisions of this Act."

"(3) Income-tax shall also include any additional income-tax, by whatever name called, levied under this Act."

"(4) If this Act provides that income-tax is to be charged in respect of income of a period other than the tax year, it shall be charged accordingly."

"(5) 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."

What this means in practice

Section 4 itself does not state a tax rate. Its subsection (1) refers to a rate or rates enacted for the tax year by a Central Act; the resulting charge remains subject to the provisions of the Income-tax Act, 2025.

"Income-tax" for this purpose also includes any additional income-tax (by whatever name it is called) levied under the Act - this is a broad umbrella term.

Ordinarily tax is charged on income of the tax year, but where the Act itself specifies a different period for a particular kind of income, tax is charged for that period instead.

Tax due under this section is collected through the usual mechanisms - deduction or collection at source (TDS/TCS) and advance tax payments - rather than only at the time of assessment.

Practical scope

Separate the tax base, the applicable rate and the collection mechanism. The base is total income computed under the Act; the rates are those enacted for the relevant tax year, subject to the Act; source deduction, source collection and advance payment operate under their own provisions.

The word “person” should not be read as limited to an individual. Determine the taxpayer’s legal category and apply the relevant computation and rate provisions instead of assuming one rate schedule applies to everyone.

Limits and separate checks

Tax deducted or collected at source is a collection mechanism. Its existence or amount does not itself settle the final charge on total income. Reconcile the computation and available credits under the applicable rules.

Section 4(4) preserves a different income period where the Act expressly provides one. Do not create a special period merely because a business prefers a different accounting cut-off.

Step-by-step computation review

1. Identify the person and the relevant tax year or expressly applicable special period.

2. Compute total income under the Act, including the appropriate exclusions and deductions.

3. Apply the relevant rate provisions and any applicable additional income-tax.

4. Reconcile the resulting tax with the statutory collection, advance-payment and credit rules.

Hypothetical example

Hypothetical illustration: an entity’s customers deduct tax from certain payments. The entity must still compute its total income and apply the rate provisions relevant to it. The withheld amount is not automatically the final tax bill; its treatment in the final reconciliation requires the credit rules.

Records and checklist

Taxpayer classification and the applicable income period.

Head-wise income computation and the rate authority used.

Source-tax and advance-tax records for reconciliation with the liability.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 4

Step-by-step flow for applying the charge under Section 4

1. 1

   Who is the person and which tax year is involved?

   Section 4(2) charges tax on the total income of the tax year of every person. Check whether Section 4(4) applies because the Act charges a particular income for a period other than the tax year.

2. 2

   Compute total income under the Act

   Apply the provisions of the Act (scope of income, heads, exclusions and deductions) to arrive at total income.

3. 3

   Apply the rate or rates enacted by a Central Act for that tax year

   Section 4(1) takes the rates from the Central Act for that year; Section 4 itself does not state any rate. Include any additional income-tax levied under the Act (Section 4(3)).

4. 4

   Account for tax already deducted, collected or paid in advance

   Section 4(5) provides that tax is deducted or collected at source or paid in advance as the Act provides. Reconcile these against the liability under the credit provisions.

   • Liability exceeds credits: The balance remains payable.
   • Credits exceed liability: Examine the refund provisions of the Act.

Practical checklist

Glossary

Charge of tax

The statutory authority to levy income tax on the specified income base.

Total income

The person's income computed under the Act for the relevant tax year.

Frequently asked questions