Taxation in India: Overview of India’s Tax System

TAXATION
Have a Friend who would ūüíô this? share this with your network

Introduction

Taxation is the means by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. From income tax to goods and services tax (GST), taxation applies to all levels.

What is Taxation?

The Central and State government plays a significant role in determining the taxes in India. To streamline the process of taxation and ensure transparency in the country, the state and central governments have undertaken various policy reforms over the last few years. One such change was the Goods and Services Tax (GST) which eased the tax regime on the sale and deliverance of goods and services in the country.

Managing personal Finance can be Confusing. Our Formal Education does not teach us Adequately for the World of Taxation, Investments, and Assets.

A Taxation is a compulsory Financial Charge or some other type of Levy Imposed upon a Taxpayer by a governmental Organization in order to Fund various Public Expenditures.

Taxes are levied in almost Every Country of the World, Primarily to raise Revenue for Government Expenditures, although they Serve other Purposes as Well.

Different Types of Taxation

Taxes are classified under two categories namely direct and indirect taxes. The largest difference between these taxes is their implementation. Direct taxes are paid by the assessee while indirect taxes are levied on goods and services.

  • A) Direct taxes
  • Direct taxes¬†are levied on individuals and corporate entities and cannot be transferred to others. These include income tax, wealth tax, and gift tax.
    • Income tax
    • As per the Income Tax (IT) Act, 1961 every assessee whose total income exceeds the maximum exempt limit is liable to pay this tax. The tax structure and rates are annually prescribed by the Union Budget. This tax is imposed during each assessment year, which commences on 1st April and ends on 31st March. The total income is calculated from various heads such as business and profession, house property, salaries, capital gains, and other sources. The assesses are classified as individuals, Hindu Undivided Family (HUF), an association of persons (AOP), the body of individuals (BOI), company, firm, local authority, and artificial judiciary not falling in any other category.
  • B) Indirect taxes
  • Indirect taxes¬†are not directly paid by the assessee to the government authorities. These are levied on goods and services and collected by intermediaries (those who sell goods or offer services). Here are the most common indirect taxes in India:
READ  Top 5 Business idea in the year 2020

Benefits of Taxes:

While paying taxes may not be a pleasant feeling, however, it is prudent to understand that tax paid by every single individual contributes towards the country’s administration and resources required for its economic progress.

  • It promotes savings as well as investments. If an individual makes a certain set of investments, a part amount of the same would be tax exempted, thereby enabling him or her to pay a reduced amount of taxes.
  • Paying tax also works as proof that you are not only disciplined in filing your tax returns but also helps at the time of loan application. This is because, at the time of purchasing a home loan, the bank requires proof of whether the applicant has filed his or her taxes regularly.

POPULAR POSTS

Author: GANESH NAYAK

 Ganesh is an Entrepreneur and a Successful Stock Market investor. Ganesh help finance professionals and Fin-tech startups to build an audience and get more paying clients online. Ganesh is  available for Sales,Marketing,Finance , as well as private consultations.

0 0 vote
Article Rating
Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments
Scroll Up
0
Would love your thoughts, please comment.x
()
x