Income tax is a direct tax imposed on the earnings of individuals, businesses, and other entities. It is calculated based on various sources of income, such as salaries, wages, investments, and business profits. The tax rate typically varies according to income levels, with higher earnings taxed at higher rates. Taxpayers can reduce their taxable income through deductions and exemptions, such as charitable contributions and mortgage interest. Filing an annual tax return is mandatory, where taxpayers report their income and calculate their tax liability. Income tax is essential for funding government services and infrastructure, ensuring public sector operations and development.