Section 4 of the Income-tax Act, 2025 charges income-tax on the total income of the tax year of every person, at the rates enacted by a Central Act, and includes additional income-tax and collection through TDS, TCS and advance tax.
What section 4 does
Section 4 is where the liability to income-tax actually arises. Everything else in the Act — computation, deductions, procedure — exists to give effect to this section. The number is unchanged from the Income-tax Act, 1961, which is rare in the new Act.
The structure is deliberately dependent. Section 4 does not fix any rate. It says that where a Central Act enacts that income-tax shall be charged at any rate or rates for a tax year, income-tax for that year shall be charged at those rates. That Central Act is the annual Finance Act, which is why the Finance Act continues to matter every single year.
The charge is on the total income of the tax year of every person. Both concepts are defined elsewhere — person in section 2, total income through the computation machinery, and tax year in section 3, the concept that replaced the previous year and assessment year.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 4(1) | Charge of income-tax at rates enacted by a Central Act | 4(1) and 4(2) |
| 4(1), proviso | Charge in respect of a period other than the previous year | 4(4) |
| 4(2) | Deduction at source and advance payment | 4(5) |
| 2(9) and 3 | Assessment year and previous year | 3 — tax year |
| 5 | Scope of total income | 5 |
Section 4 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the rate comes from the Finance Act
Where any Central Act enacts that income-tax shall be charged for any tax year at any rate or rates, income-tax for that tax year shall be charged at that rate or those rates in accordance with and subject to the provisions of this Act. The Income-tax Act supplies the machinery; the Finance Act supplies the rates. Without an annual Finance Act fixing rates, this section has nothing to operate on.
Sub-section (2) — what is charged and on whom
The charge is on the total income of the tax year of every person as per the provisions of the Act. Three elements: total income (computed under the heads and adjusted by Chapters V to IX), the tax year (section 3), and every person (defined in section 2).
Sub-section (3) — additional income-tax is included
Income-tax shall also include any additional income-tax, by whatever name called, levied under this Act. This brings within the charge levies such as the additional income-tax on an updated return under section 267, without needing a separate charging provision for each.
Sub-section (4) — periods other than the tax year
If the 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. This supports provisions such as the assessment of persons leaving India (section 317) and of discontinued business (section 320), where a part-period is assessed.
Sub-section (5) — how the tax is collected
For income chargeable under this section, income-tax shall be deducted or collected at source or paid in advance as provided under the Act. This is the link to Chapter XIX — sections 392 to 394 for TDS and TCS, and sections 403 to 410 for advance tax.
Worked example
How the pieces fit together for an individual in tax year 2026-27.
| Step | Provision | What it supplies |
|---|---|---|
| Is there a charge at all? | Section 4(1) and (2) | Yes — on total income of the tax year of every person |
| At what rate? | The annual Finance Act, read with section 202 for the regime | The slab rates |
| On what figure? | The head-wise computation in Chapter IV, then Chapters V to IX | Total income |
| For which period? | Section 3 — the tax year | 1 April 2026 to 31 March 2027 |
| How is it collected? | Section 4(5) with sections 392 to 394 and 403 to 410 | TDS, TCS and advance tax |
| Any additional levy? | Section 4(3) with section 267 | Additional income-tax on an updated return |
The practical point for anyone reading the new Act is that section 4 is not where the rates are. For an individual the slab table sits in section 202; for special incomes in section 194; for capital gains in sections 196 to 198; and surcharge and cess come from the Finance Act.
Compliance checklist and due dates
- Read section 4 with the annual Finance Act — the section itself prescribes no rate.
- Identify the correct rate provision: section 202 for individual slabs, sections 196 to 198 for capital gains, section 194 for special incomes, sections 199 to 205 for companies and co-operative societies.
- Remember the charge is on total income, so complete Chapters IV to IX before applying any rate.
- Additional income-tax, such as on an updated return under section 267, is within the charge by virtue of sub-section (3).
- Collection is through TDS, TCS and advance tax under sub-section (5) — a charge exists even where no return has yet been filed.
Common mistakes
- Looking for tax rates in section 4. They come from the Finance Act and the specific rate sections.
- Applying a rate to gross receipts rather than to total income.
- Assuming the charge only arises on assessment. It arises under section 4 and is collected in advance under sub-section (5).
- Overlooking that the tax year, not a previous year and assessment year pair, is the unit of charge.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.