## The Charging Section — Section 4

Section 4 is the heart of the Income-tax Act — it is the provision that actually charges (levies) income tax. Three questions answer how the charge works:

### 1. At What Rate? (Tax Rates)

Income tax is levied at the rates specified in:

the Annual Finance Act, or
the Income-tax Act, or
both.

### 2. On Whom? (Scope — every "person")

Tax applies to every "person" as defined in Section 2(31). A person includes:

Individual
HUF (Hindu Undivided Family)
AOP (Association of Persons) / BOI (Body of Individuals)
Firm
Company
Local Authority
Every other artificial juridical person

### 3. On What & For Which Year? (Amount Liable)

Tax is charged on the Total Income.
Income is taxed for the year it is **earned — i.e., the previous year — and not** the assessment year.

### The General Rule vs Exceptions

General rule: Income of the previous year (PY) is taxed in the following assessment year (AY).
Exceptions (income taxed in the same year it is earned): Sections 172, 174, 174A, 175 and 176.

Worked example

### Example 1

Q: On whose income does Section 4 levy tax, and at what rates?

A: On the total income of every "person" (as defined in Section 2(31)), at the rates fixed by the Finance Act and/or the Income-tax Act.

### Example 2

Q: Income earned during PY 2025-26 is generally taxed in which year? Name the provisions that are exceptions to this.

A: Generally taxed in AY 2026-27 (the year following the previous year). Exceptions where income is taxed in the same year it is earned: Sections 172, 174, 174A, 175 and 176.

⚠️ Common exam mistakes

Saying income is taxed in the assessment year it is earned — it is earned in the previous year and taxed in the following assessment year.
Forgetting the exceptions (172, 174, 174A, 175, 176) where PY income is taxed in the same year.
Omitting categories from the Section 2(31) definition of 'person' (especially artificial juridical person and local authority).

Bare-Act text Section 4 (Charge of income-tax) · Income-tax Act, 1961 · click to expand

Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every person.

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Charging Section [Section 4]

Worked example

⚠️ Common exam mistakes