Taxation And Indian Taxes

Taxation and Indian Taxes

Most people get confused with the taxation and tax rules implemented in India. However, this confusion arises because of the fact that different taxes and tax rates prevail. Taxation rules are prospective and retrospective in certain times. Here this confusion can be settled with a bit of understanding the rules of taxes and taxation in India.

There are two tax types namely direct tax and the other indirect tax. This depends on the nature of tax that each individual pays to the government for the respective income that one receives. These two taxes are governed by two boards namely the (CBEC) Central Board of Excise and Customs and the other the (CBDT) Central Board of Direct Taxes.

Compilation of direct taxes

Direct taxes are those that are paid directly by the tax payer to the government from the annual income received. Here are a few of the important direct taxes that are mandatory:

a. Income Tax – this is a very familiar form of tax also known as TDS and is paid by almost every earning individual based on the earning amount. However, there is a minimum earning amount that is exempted from this tax.

b. Wealth tax - this tax is applicable to those earning an extra income besides regular income. If your wealth income exceeds Rs.30,00,000 per annum you are liable to pay a percentage of tax.

c. Estate/inheritance/property tax – above 50000 received from other sources is considered as gift tax and is taxable. However, money received from relatives, marriage gifts or inheritance incomes are also exempted from this tax.  

d. Corporate tax – this is the major income in revenue because it is a tax that is collected from other companies operating in India.

e. Capital gains/property tax – this tax is applicable at the time of selling stocks and property and the rates vary from short term and long terms capital gains.

Indirect Tax

This tax gets collected by various groups and finally it is paid by a single person to the government. This is when sales tax, VAT and other taxes are collected from the public and then paid to the government as indirect tax. With the introduction of GST all these taxes come under one umbrella making it easier for tax calculation. The list of indirect taxes includes:

a. Service tax – those who provide services in India are liable to pay service tax. This includes services like transport, leasing, voice/internet etc.

b. Custom duty – this tax is levied when goods are exported or imported from/to India. However, the rules for this tax vary for each sector and hence there are frequent changes in this taxation structure.

c. Excise duty - goods that are manufactured in India for consumption purpose are taxable according to the Indian taxes.

d. VAT and sales tax – this type of tax is very common since every product bought in India is taxed.

e. Security transaction tax – this is levied on those buying and selling stocks, mutual funds, derivatives etc.

Though these taxes and taxation methods are explained the exact percentage and slabs cannot be stabilized since they keep changing from time to time.

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