The direct tax which is paid by individual to the Central Government of India is known as Income Tax. It is imposed on our income and plays a vital role in the economic growth & stability of our country. Government generates revenue through this tax system.

The word Tax originated from the Taxation. which mean Estimate. Hence, Income Tax mean Income Estimate, which helps the government to know the actual economic strength of a person. It is also a way to set up an economic standard for general people. It helps the Government to know the distribution of money among countrys people.

Income Tax has been in force in different forms since years. If we go through the history of India, we get relevant information regarding the taxation system of India. In ancient history, it is mentioned about such systems which were imposed on the income, expenditure and other subject. Even information of the same is given in Manu Smriti and Arthasatra which confirms its existence at that time.

In modern India, Income Tax came into existence in 1860 with the implementation of first Income Tax Act. After implementation of this Act, people became aware of the actual meaning of Income Tax. This act was in force for first five years. After this, in 1865, second Act came into force. There were major changes in this Act relative to the first. It proved itself as a good factor for the growth of our economy. With this Act a new concept of Agriculture Income came into existence.