CBDT

Income tax in India runs on the Income Tax Act, 1961, backed by the Income Tax Rules, 1962. Someone has to administer that law day to day — decide how it applies to situations the Act does not spell out, and keep the Rules updated.

That job belongs to the Central Board of Direct Taxes (CBDT), which sits under the Ministry of Finance. Beyond administering the Act, the CBDT issues Circulars and Notifications whenever needed, which is how much of the fine detail of income tax practice actually gets settled.

The workbook cites the CBDT's role in several specific places, which shows how it operates in practice, not just in theory:

• Approving superannuation funds for tax purposes is done subject to conditions the CBDT may specify under Section 36(iv), alongside limits prescribed for the purpose.
• STT payment at acquisition for Section 112A long-term capital gains has been relaxed by a specific CBDT Notification (No. SO 5054(E), dated 1-10-2018), which exempted certain modes of transfer — such as shares acquired under a scheme of amalgamation — from the condition that STT must also have been paid at the time of acquisition.

In both cases the underlying Income Tax Act sets the rule, and the CBDT's Circular or Notification fills in exactly how it applies — which is the Board's day-to-day function across the tax system, not only in these two instances.

Illustrative figures, following the workbook's own examples.

Mr X held shares of A Ltd, which amalgamated with B Ltd. He received shares of the new company AB Ltd and sold them after paying STT on the sale, but STT was never paid at the time the original shares were acquired — since he got them long before STT existed in its current form on such transfers.

Ordinarily, Section 112A's concessional 12.5% rate above Rs 1,25,000 needs STT to have been paid at both acquisition and transfer. The CBDT's 2018 Notification removes that requirement for shares acquired through modes such as amalgamation. So Mr X's long-term capital gain of Rs 2,20,000 still qualifies for the Section 112A rate, even though STT was paid only on the sale — because the CBDT, exercising its administrative role, notified the exemption.

Chapter 7 (Concepts of Taxation), section 7.1, names the CBDT as the body to which administration of the Income Tax Act is assigned. Chapter 4 references CBDT-specified conditions for superannuation fund contributions, and Chapter 13 cites a specific CBDT Notification on STT and Section 112A. Expect the CBDT to appear as the answer to "which body administers direct tax law in India", and in questions that hinge on a specific Notification or Circular.

• CBDT administers direct taxes — income tax and related law — not GST or customs, which have their own boards.
• The CBDT sits under the Ministry of Finance, not under SEBI or RBI, which candidates sometimes guess.
• Circulars and Notifications, not the Act itself, are how the CBDT fills gaps — a workbook fact that can be tested directly (which body issues Notifications interpreting the Income Tax Act).