Income tax is levied on the financial earnings or profit from various sources such as wages, salaries, dividends, interest, and capital gains. The government utilizes income tax revenues to fund public services, infrastructure, and social programs. The rate of income tax can vary based on the level of income, residency, and specific deductions or credits that may apply. There are generally two types of income tax systems: progressive taxation, where tax rates increase with higher income levels, and flat taxation, which applies a single tax rate regardless of income.