Income tax is a tax that is levied on the income or profits of individuals, businesses, and other organizations. It is typically based on the amount of money earned during a specific period, such as a year, and is usually calculated as a percentage of the total income. Income tax is used to fund government operations and public services and is generally collected by the government through the taxation system. In most countries, the government establishes a progressive income tax rate, which means that individuals and organizations with higher incomes pay a higher percentage of their income in taxes. Income tax is typically paid on earnings from employment, business profits, investments, and other sources of income. In some cases, individuals and organizations may be eligible for tax credits or deductions, which can lower the amount of income tax they owe.

Income tax is a direct tax imposed by governments on individuals and entities based on their earnings or income. The fundamental principle is that individuals and businesses should contribute a portion of their income to support public services and government functions. The income tax system typically involves a progressive structure, where higher-income earners face higher tax rates. Governments use the revenue generated from income taxes to fund public services such as education, healthcare, infrastructure, and defense.

Income tax encompasses various types of income, including wages, salaries, dividends, interest, and profits from businesses. Tax liabilities are calculated based on applicable tax rates and deductions, with taxpayers often required to file annual returns to report their income accurately. Tax codes and regulations can vary widely between countries, and tax laws are subject to changes by legislative bodies to meet evolving economic and social needs. Compliance with income tax regulations is a legal obligation for individuals and entities to ensure the fair and equitable distribution of public resources.