I’ve been paying income tax in India for about 6 years now but in a blissfully ignorant fashion; without ever understanding what I’m doing or why I am doing it. It doesn’t help that the tax laws and processes are overly complicated.
Anyway for my own understanding, here are some quick notes on taxes in India. You pay taxes to your government, hoping your political leaders and government machinery will use the money do good things for you like building public infrastructure, paying the police force, etc.; thus facilitating a better environment for your existence. Taxes are generally of two kinds

1. Direct - Taxes charged on income.
2. Indirect - Taxes charged on transactions. The tax department breaks down income into five heads.
3. Income from Salary: Income from salary and pension are covered under here
4. Income from Other Sources: Income from savings bank account interest, fixed deposits, winning KBC
5. Income from House Property: This is rental income mostly
6. Income from Capital Gains: Income from sale of a capital asset such as mutual funds, shares, house property
7. Income from Business and Profession: This is when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, chartered accountants, doctors, and lawyers who have their own practice, tuition teachers

How does the taxation process work?

The Indian financial year runs from April 1st to March 31st. You are supposed to pay your taxes during the financial year on income you received during the year, usually on a quarterly basis.  The income tax department has specified deadlines for people to pay their taxes. Based on the type and amount of income and any deductions you have availed, you can compute and pay your tax bill.   In case, future income is unknown you may anticipate and pay excess tax in advance, and later file for a return. At the end of the financial year, you are supposed to provide the income tax department a summary of all your income and all your tax payments allowing them to verify that you’ve paid the correct amount of taxes; this is called the income tax return (ITR). The ITR is verified by the tax department and they notify you of the difference (if any), which has to be later adjusted. These final tax calculations i.e. the assessment of your tax liability is done in the next financial year which is referred to as the Assessment year, and the year in which the income was earned is referred to as the previous year. Notes

• The ITR process is attachment-free.  You don’t need to submit any proof of investment, statement of profit/loss, etc. that you used to calculate your tax liability. However, you are required to maintain those in case the tax department wants to check up on these later.
• In India, as a salaried person, you pay TDS aka tax-deducted at source, this is an indirect tax whereby the transaction in which your employer pays you is taxed. The tax charged is based on your income, the income tax department has defined various income slabs and your employer pays tax for you on a quarterly basis.
• As a freelancer/professional, you pay advance tax if you pay it during the financial year; else you pay self-assessment tax in case you pay it during the assessment year. These are direct taxes.
• Not paying tax during the financial year, attracts a penalty in the form of interest which must be paid on the period of delay.  References

1. Cleartax guide to Income tax
2. Income tax department -  Vision 2020
3. The tax department’s page on e-filing
4. Indirect tax on Wikipedia This is but a tiny glimpse into the swamp of complications that is taxation.