In India Tax is regulated and administered by the Ministry of Finance under the Government of India. Taxation is the government's main source of revenue enabling the government to carry out its various activities like infrastructural activities which includes building of roads, canals, bridges, buildings and other defensive and administrative activities. Several types of taxes are applied to different categories of the population.
Direct Tax |
Indirect Tax |
Flat Tax |
Consumption Tax |
Income Tax |
Sales Tax |
Excise Tax |
Wealth Tax |
Transfer Tax |
Poll Tax |
Payroll Tax |
Dividend Tax |
Endowment Tax |
Fuel Tax |
Inheritance Tax |
Value Added Tax |
Social Security Tax |
Self Employment Tax |
Federal Income Tax |
Deposit Interest Retention Tax |
Estate Tax |
Capital Gains Tax |
Gift Tax |
Fringe Benefits Tax |
Death Tax |
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The Purpose of Taxes
- Taxes raise money to finance government programs and services.
- Taxes regulate or restrict certain types of business practices, products or services.
- Income, sales, estate and gift and property taxes are revenue taxes.
- Excise taxes and import duties are regulatory taxes.
The following is a brief description of some of the taxes that are levied in India by the government:
Income tax
An income tax is a tax which is imposed on the earning capacity of an individual, legal entities and body corporate. The Income Tax Act of 1961 stipulates that any person who qualifies as an assessee and whose gross income is more than the exemption limit is required to pay Income Tax in accordance with the rates indicated by the Finance Act.
A variety of income taxes are being imposed by the government at distinct rate of taxes .Income tax may be in the nature of progressive, regressive and proportional. Corporate tax is a tax which is levied on the companies and it is also known as corporate income tax and corporation tax. Under individual income taxes, taxes are imposed on the entire income earned by an individual. However such taxes are entitled to certain deductions but under corporate income tax, taxes are charged on the net amount which is the amount left after deduction of expenses and other write offs from the total receipt of an individual.
Property tax
A property tax is a tax which is levied on property owned by an individual. Property Tax India is levied on residents by local municipal authorities to upkeep the basic civic services in the city. In India, the actual owners of property are liable to pay municipal taxes which is in contrast to that in the United Kingdom, where the tenant is liable to do so.
The amount of tax charged is based on the value of the property of an individual which is charged on yearly basis. There are two types of property tax commonly known which are known as inheritance tax which is levied usually whenever a person acquires the property of the deceased and the other is known as stamp duty which is imposed whenever there is transfer of ownership.
Direct and Indirect Taxes
Direct taxation is defined as the tax which is directly levied on the citizens of a country. All individuals and business concerns have to pay direct taxes to the government on a regular basis. These direct taxes are calculated on every source of income that accrues to the business of individual.
On the other hand, the citizens of a country are charged certain levies indirectly as well. These indirect levies are known as indirect taxes. These are the taxes payable on an activity or a commodity. Some common examples of indirect taxes are sales tax, custom duty, service tax, excise duty and value added tax (vat).
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