# Sources of Income-tax Law
Indian income tax is not governed by a single document. Five distinct sources interact, and you must know the relative authority of each.
## 1. The Income-tax Act, 1961
The foundational statute. Everything else (rules, circulars, the Finance Act) operates within or on top of the Act.
## 2. The Finance Act (Annual)
- Presented every year by the Finance Minister during the Budget Session of Parliament.
- Becomes law only after approval by both Houses and assent of the President.
- Its First Schedule is the key part. Remember the four Parts:
| Part | What it specifies |
|---|---|
| Part I | Tax rates for the current Assessment Year (AY 2025-26) |
| Part II | TDS rates for the current Financial Year (FY 2025-26) |
| Part III | Rates for Salaries and for advance tax for the current FY (Normal/Old Tax Regime) |
| Part IV | Rules for computing net agricultural income |
> Memory hook: I → AY rates, II → TDS, III → Salary & Advance tax, IV → Agriculture.
## 3. Income-tax Rules, 1962
- Framed by the CBDT to implement the Act; updated as needed.
- Contain sub-rules, provisos (exceptions) and Explanations (clarifications).
- Must always be read together with the Act.
## 4. Circulars and Notifications
This distinction is heavily tested:
| Issued by | Binding on Department? | Binding on Taxpayer? | |
|---|---|---|---|
| Circulars | CBDT (to clarify/interpret sections) | Yes | No |
| Notifications | Central Government (to enforce provisions / amend rules) | Yes | Yes |
> A circular cannot force a position on the taxpayer, but the taxpayer can use a beneficial circular against the department.
## 5. Legal Decisions of Courts (Case Laws)
- Essential for interpreting the law and resolving situations the statute does not foresee.
- Supreme Court rulings are binding nationwide.
- High Court rulings are binding only within that State's jurisdiction.
## Linked rule: Political contributions [80GGB / 80GGC]
- Contributions made in cash are not eligible for deduction under 80GGB/80GGC.
- "Political party" means a party registered under Section 29A of the Representation of the People Act, 1951.