India has well laid out and structured rules governing its taxation policies. These taxation laws are laid out keeping in mind the legalities of our Constitution .Therefore, any law that is ultra vires, the Indian constitution will be null & void. As per the Constitution of India, the Central Government has the right to collect income-tax as specified in the Income Tax Act , 1961.

All the laws governing collection of income-tax is specified in the Income Tax Act 1961, implemented according to the rules laid down in the Income Tax Rules 1962 , administered through the circulars issued by the Central Board of Direct Taxes ( CBDT) and interpreted by the judgements of the Supreme court and High courts which settle the legal disputes between the Government and tax-payers.

This Income Tax Act extends to the whole of India. It comprises of 23 chapters divided into 298 sections in all. There are amendments made through the Finance Act as per the circumstances and situations. The taxes that are levied are divided into Direct and Indirect Taxes.