Income Tax is a form of direct tax, collected annually by the Central Government on all forms of income (other than agriculture income) and then shared with the states. Central Government levies income tax on the taxable income of individuals, Hindu Undivided Families (HUFs), companies, co-operative societies and trusts. Income Tax department of India is directed by the Central Board for Direct Taxes (CBDT) and forms a part of the Department of Revenue under the Ministry of Finance.

Source
According to the Income Tax Act of 1961, a person whose total income surpasses a certain �predetermined exemption limit�, shall be required to pay a certain amount of income tax at the rate or rates, as prescribed in the finance act. Apart from remuneration for work (Income from Salary), an individual may be charged Income tax on this following list of incomes:

Income from House Property
Income from Business or Professions
Income from Capital Gains

Income Tax Rates/ Slab (2008-09)
Listed below are the Income Tax Rates/ Slab for the year 2008-09 (Tax Rates meant for individuals, HUF (Hindu Undivided Families), Association of Persons (AOP) and Body of individuals (BOI)

Taxable Income	Rate
Up to 1,50,000 (for men)	NIL
Up to 1,80,000 (for women)	NIL
Up to 2,25,000 (for senior citizens)	NIL
1,50,000 - 3,00,000	10%
3,00,001 - 5,00,000	20%
5,000,001 or more	30%

Note: A surcharge (tax on tax) of 10 per cent on the overall tax is applicable where the total income is more than Rs 1,000,000.

All the above mentioned income taxes are subject to 3% education cess, applicable on the tax paid. Moreover, business income is taxed at a fixed rate of 30% for Indian companies and 40% for foreign companies, plus surcharge in both cases.