Tax structure of India : All need to know about it
The government’s way of earning an income is known as Tax. It can further be utilized boost the national economy or its citizens. The taxes in India are decided by the central government along with the state government and in collaboration with the local governments. Here are few things you need to know about Tax structure of India .
It is to note that the government cannot impose tax that it wishes to.
Types of Taxes:
Taxes in India are of two types:
1. Direct Tax
2. Indirect Tax
Besides this, there are ‘Other Taxes’ which have been brought into effect by the Central government to serve an agenda.
These taxes in India are paid by you in person. They are levied directly upon an individual and cannot be transferred onto someone else.
The body that looks upon the direct taxes is the Central Board of Direct Taxes (CBDT). CBDT is a part of the Department of Revenue.
Few examples of Direct Tax are:
1. Income Tax – tax levied on an individuals earning in a financial year
2. Capital Gains Tax – tax payable when you receive a considerable amount of money
3. Securities Transaction Tax – it is payable whenever you buy or sell a share.
These taxes in India are paid through an entity in the supply chain. But it is actually passed on to the customer as part of the good or service.
Ultimately the consumer is made to pay more for a product. This tax can be shifted from one individual to another.
Few examples of Indirect Tax are:
1. Sales Tax – It is levied on the sale of a particular product
2. Service Tax – This tax is levied on the services provided
3. Value Added Tax – This tax is levied upon in all stages of the supply chain.
These taxes are not the major revenue generators; they help the government in funding towards the basic infrastructure and maintaining the well being of the country. These taxes are primarily referred to as ‘cess’.
Example of Other Taxes are:
Professional Tax, Property Tax – Municipal Tax, Entertainment Tax etc.