All About Different Types of Taxes in India
Tax is a financial charge that is foisted on an individual or a financial organization by the Government of India or their respective states or similar other functionalities in a state. The imposition of various taxes being monitored in the country is carried out by the Department of Ministry of Finance and Revenue.
Different Types of Taxes:
In a developing and democratic country like India, we have the existence and imposition of various kinds of taxes in India. Taxes in India are categorized as direct or indirect. The type of taxes depends on whether a particular tax is imposed by the central Government state government or any other municipalities. The following are some of the most important and mandatory taxes imposed on an individual in India.
As the name suggests, the direct taxes are those which are directly paid to the Union Government of India. As per a survey report, the Indian Republic has witnessed a considerable increase in the collection of such taxes over a short span of the past few years. There has been a viable growth in the collection of these taxes which suggests a healthy economic growth in the country. It portrays the compliance of more taxes along with more reliable administration of taxes. Some of the Direct Taxes that are foisted by the Government of India are:
• Corporate Tax
• Securities Transaction Tax
• Capital Gains Tax
• Double Tax Avoidance Treaty
• Fringe Benefit Tax
• Personal Income Tax
• Tax Incentives
• Banking Cash Transaction Tax
In contrast to the direct taxes, such a tax within a country is generally imposed on some specified services or some particular goods. The indirect tax is not imposed on any particular organization or person. Almost all the activities, which fit within the category of indirect taxation, ranging from the manufacture of goods and delivery of services to those that are meant for consumption purposes. Apart from these, the variety of activities and services, which are related to import, trading, etc. are even included within this range. This wide range results in the embellishment as well as the implementation of some or other indirect tax in all lines of business.
One of the most crucial taxes in India is the income tax which is a mandatory tax paid by every Indian citizen who fits into the eligibility zone of the Taxpayers. Income Tax in India includes all income aspects of an individual except the agricultural income that is imposed and collected by the central government of India. This income is also shared with the states. The Income Tax was encapsulated in India from 1860 onwards.
However, after many alterations, finally, with the evolution of the Indian Income Tax Act, in the year 1922, there was a revolutionary change brought by the All India Income Tax Committee. This was significant as after this the entire administration of the Income Tax was brought under the direct influence of the Central Indian Government. This act got into action again in the year 1961, and the present Income Tax process in India is still following the rules and regulations of the 1961 act.
According to the Income Tax Act 1961, an individual whose total income is more than the maximum limit, is under the domain of chargeable Income Tax. The individual has to pay the Income Tax at the rates stated in the provisions of the Finance Act. The payment of the Income Tax is calculated on the basis of the total income of the previous year in the relevant financial assessment year. To determine the total income of an individual, his residential status is a mandatory parameter to be worked upon. It’s advised to every taxpayer to file the Income Tax Return as per the law to be followed.
This is applicable to the consumption of any kind of goods or services. This tax is based on consumption and not on income. The Consumption Tax can be taken as a sales tax, as this tax is also receptive in nature like the other sales taxes which are pure taxes. But, there are some remedies by which the Consumption Tax can be made much better and progressive in nature. Some of the methods for decreasing the regressive trait of this tax include the use of exemptions, reduced rates, rebates, or graduated rates. This will in other terms allow the savings to accumulate and absolute the tax burdens.
It is a type of income tax that is imposed on the payments made as to the dividend to the stockholders of the company who is paying the tax. Dividends are basically the profit shares of the company which is then given to the shareholders.
The controversy arises here because the dividend is nothing but part of the profit of the company. The profit is basically the income of the company, and a tax is paid on behalf of that particular income. Now, when the dividend is paid to the shareholders, a dividend tax is imposed on them, and so there is double taxation charged on the same income – once, the tax is paid by the company, the shareholder pays the tax on the same amount.
The dividend tax has today become one of the major issues of debate in the current financial setup. Many of the countries are taking certain steps to completely abolishing the dividend tax because double taxation is not taken to be a good aspect for the economical growth and standardization of the country on a global scale. The dividend tax also poses a severe problem for senior citizens and retired personnel. Many financial experts are of the opinion that dividend tax should be completely abolished in order to develop the economy and fair practice of taxation should be followed.
The death tax also referred to as the Inheritance Tax, is gaining a boom in the real estate market globally. The Estate Tax rates vary vastly across countries worldwide.
It is estimated that Japan stands at the top offering a tax rate of 70 percent, South Korea (50 percent) being on the second slab, followed by the US (46 percent), and 40 percent for France and UK each. Other than India, there are some other countries like Australia, China, Russia, and Malaysia which do not impose an Estate tax. It should also be noted that Estate Tax or Estate Duty which was earlier incorporated in India in 1953, was taken away under the aegis of the then Finance Minister, Mr. V.P. Singh in the year 1985. The economic growth and increasing capital markets in India have been generating an unmatched boon for the Indian promoters. Still, not unlike the other advanced economical market worldwide, there is no Estate Tax in India. On the other hand, throughout the globe, the Estate Tax, also known as the Death Tax, is very popular.
The Estate Tax is to be paid on the economic value of the accumulated savings and assets of a deceased person. This taxon Estate was patterned with an aim to prevent the inheritors from a rich family to enjoy the benefits as compared to the less advantageous in the society. The main motive was to strike a balance and maintain intergeneration equity. On the other view front, many tax experts often scorn this Estate Tax, as it is difficult to assess and collect.
Fuel tax is also known as the petrol tax, gasoline tax, gas tax, or fuel duty. The fuel tax is a kind of sales tax that is charged on the sales of fuel. The fuel tax is one of the crucial factors pertaining to taxation in many countries including India.
The fuel tax in some countries is speculated to roadways and transportation facilities such as in the US. The fuel tax in many other countries is taken as a source of the general type of income from revenue. The fuel tax is mostly foisted on the fuel which is used for the purpose of transportation and not imposed on fuel meant for the purpose of running agriculture-based transport vehicles, used as heating oil for household purposes and other non-transportation usages.
The demand for petrol is not very flexible in nature, so the fuel tax will be regarded as a revenue-generating medium in the short span of the economy but with flowing with every passing second, in the long run as per the theory of the expert panel, the populace would lower the consumption of the fuel by the means of mass transit systems, an alternative source of fuel, fuel economic transport facilities, etc. and the sale of the fuel would decline, which would, in turn, decline the tax revenue on the fuel. Some of the environmentalists are in the thought of introducing fuel tax as a method to check the pollution due to the burning of fossil fuels.
Sales tax is imposed when goods are sold or bought within a country or a state. Knowing more about the sales tax:
S. E. T. or Self Employment Tax:
Self-employment tax (SET) is a type of taxation pertaining to the social security tax and the Medicare tax for the individuals who are self-employed, i.e., those who are engaged in business or any commercial activity of which is approved legally by the Governmental authorities. The concept of the self-employment tax is similar to the social security tax and the Medicare tax which is withheld from the monthly income of the professionals involved in any of the services under the private or public sector. The employees of most of the working professionals calculate the social security tax and the Medicare tax of the related individual.
Social Security Tax (SST):
The SST is a popular concept in the U S. The Social Security Tax is a benefit scheme for the employees after they retire from work.
The social security tax is divided into two parts – a part of the monthly salary of the individual is deducted, and another part of his salary is to be contributed on the basis of the monthly wages by the employer under whom the employee is working. The exact total amount of money makes up the SST. The Social Security Tax benefits are provided with the help of the tax levied on the employee’s income. In the case of self-employed individuals, the contribution to the social security tax is made entirely by the person on his own. The social security tax is imposed under the United States Social Security Act of 1935, predictions that were set for the purpose of providing national social insurance to provide economic security to employees in the US.
The social security tax programs in India are very famous in the name of the Provident Fund. The concept of the Provident Fund is similar to the social security tax programs that are being preferred by people nowadays. Provident Funds are of various kinds such as Public Provident Fund, Employee’s Provident Fund, and General Provident Fund.
A payroll tax is one of the important concepts in the field of taxation. Payroll tax comprises of 2 basic types of taxes. The Payroll tax may follow a fixed rate format, or the rate may be directly proportional to the income or salary of the employee. More about the payroll tax
Tax on Poll:
In India, Poll Tax is very similar to the road tax modes of transport but is not of much importance here. However, in 2002, it was decided by the Transport Minister that the Poll Tax on all-India tourist vehicles entering Jammu and Kashmir would be Rs Two Thousand for a single day per vehicle.
Tax on Property:
In India, the property taxes are normally foisted on the yearly value of the assets that are taxable. In case if the income comes on a rent basis, it will be subjected to the tax rates which are applicable for income coming from estate properties. If the property is held for business or professional front, the profits from the same will be subjected to taxes:
Property Tax Deductions:
In India the following cases encounter property taxes:
• If 30 percent of the annual value of the house has been used for property repair and maintenance.
• If loans have been involved to buy, repair, establish or renew the property. If the house has been renovated using borrowed money, then the interest paid on the same will be favored from property taxes.