Taxation in India
Taxes in India are imposed by the Central
Government and the state governments. Some minor taxes are also levied by the
local authorities such as the Municipality. The authority to levy a tax is
derived from the Constitution of India which allocates the power to levy
various taxes between the Centre and the State. An important restriction on
this power is Article 265 of the Constitution which states that "No tax
shall be levied or collected except by the authority of law." Therefore each
tax levied or collected has to be backed by an accompanying law, passed either
by the Parliament or the State Legislature. In 2010-11, the gross tax
collection of the Centre amounted to INR 7.92 trillion, with direct tax and
indirect tax contributing 56% and 44% respectively.
Collected Tax amount is used for building
nation (infrastructures, Gov. Welfare, Education and other development). So
it’s said that "Taxes are paid, Nation are made"
Types of Taxes in India
Direct Taxes:
1.
Income Tax:-
We all know the term Income tax. Income Tax
Department functions under the Department
of Revenue in Ministry of Finance.
It is responsible for administering following direct taxation acts passed by
Parliament of India. Every individual whose total income exceeds taxable limit
has to pay income tax based on prevailing rates applicable time to time to the
Central Gov. of India. Generally people doing investments in different schemas
can save the income tax.
FYI 2014-15
Budget by Given Gov.
·
No changes
in Tax rates, surcharge and Education Cess with compare to 2013-14
·
Increase in
Exemption Limit as per below table compare to 2013-14 Budget.
Person
|
Old
Exemption Limit
(Rs.)
|
New
Exemption Limit
(Rs.)
|
Male/Female
(Below 60 Years)
|
2,00,000
|
2,50,000
|
Senior Citizen
(60 to 79 Years)
|
2,50,000
|
3,00,000
|
Super Senior Citizen
(80 Years and Above)
|
5,00,000
|
5,00,000
(No Change)
|
2.
Capital Gains Tax:-
Capital Gain tax as name suggests it is tax
on gain in capital. If you sale property, shares, bonds & precious material
etc. and earn profit on it within predefined time frame you are supposed to pay
capital gain tax. The capital gain is the difference between the money received
from selling the asset and the price paid for it. Capital gain tax is
categorized into short-term gains and long-term gains. The Long-term Capital
Gains Tax is charged if the capital assets are kept for more than certain
period 1 year in case of share and 3 years in case of property. Short-term
Capital Gains Tax is applicable if these assets are held for less than the
above-mentioned period. Rate at which this tax is applied varies based on
investment class.
Example
If you purchase share at say 1000 Rs/- (per
share) and after two months this price increased to 1200 Rs/-(per share) you
decide to sale this stock and earn profit of 200 Rs/- per share. If you do so
you have to pay Short term CGT (capital gain tax) @ 10% +Education cess on
profit as it is short term capital gain. If you hold same share for 1 year or
above it is considered as long term capital gain and you need not to pay
capital gain tax. it is considered as tax free.
Similarly if you purchase property after two
year if you find that property price in which you invested has increased and
you decide to sale it you need to pay short term capital gain tax. For property
it is considered as long term capital gain if you hold property for 3 years or
above.
3.
Securities Transaction Tax
A lot of people do not declare their profit
and avoid paying capital gain tax, as government can only tax those profits,
which have been declared by people. To fight with this situation Government has
introduced STT (Securities Transaction Tax ) which is applicable on every
transaction done at stock exchange. That means if you buy or sell equity
shares, derivative instruments, equity oriented this tax is applicable.
This tax is added to the price of security
during the transaction itself, hence you cannot avoid (save) it. As this tax
amount is very low people do not notice it much.
4.
Corporate Tax
Corporate Taxes are annual taxes payable on
the income of a corporate operating in India. For the purpose of taxation
companies in India are broadly classified into domestic companies and foreign
companies.
Indirect Taxes
5.
Value Added Tax/Sales Tax
Sales tax charged on the sales of movable
goods. Sale tax on Inter State sale is charged by Union Government, while sales
tax on intra-State sale (sale within State) (now termed as VAT) is charged by
State Government.
Sales can be broadly classified in three
categories. (a) Inter-State Sale (b) Sale during import/export (c) Intra-State
(i.e. within the State) sale. State Government can impose sales tax only on
sale within the State.
CST is payable on inter-State sales is @ 2%,
if C form is obtained. Even if CST is charged by Union Government, the revenue
goes to State Government. State from which movement of goods commences gets
revenue. CST Act is administered by State Government.
The Sales Tax is the most important source of
revenue of the state governments; every state has their respective Sales Tax
Act. The tax rates are also different for respective states.
Tax imposed by Central government on sale of
goods is called as Sales tax same is called as Value added tax by state
government.VAT is additional to the price of goods and passed on to us as buyer
(end user). Around 220+ Items are covered with VAT.VAT rates vary based on
nature of item and state.
Government
is planning to merge service tax and sales tax in form of Goods service tax
(GST).
Value Added Tax (VAT) is a multi-point system
of taxation. Tax is levied on value addition at each stage of transaction in
the production/ distribution chain. The term 'value addition' implies the
increase in value of goods and services at each stage of production or transfer
of goods and services. VAT is a tax on the final consumption of goods or services
and is ultimately borne by the consumer. VAT allows 'Input tax credit (ITC)'
for tax paid at earlier stage, which can be appropriated against the VAT
liability on subsequent sale.
6.
Service Tax
Most of the paid services you
take you have to pay service tax on those services. This tax is called service
tax. Over the past few years, service
tax been expanded to cover new services.
Few of the major service which comes under
vicinity of service tax are telephone, tour operator, architect, interior
decorator, advertising, beauty parlor, health center, banking and financial
service, event management, maintenance service, consultancy service.
From
01.04.2012 onwards, Rate of service tax is 12% + 2% (of service tax) education
Cess + 1% (of service tax) Secondary & Higher Education Cess (aggregating
to 12.36%). This tax is passed on to us by
service provider.
7.
Custom duty And Octroi (On Goods)
Custom Duty is a type of indirect tax charged
on goods imported into India. One has to pay this duty , on goods that are
imported from a foreign country into India. This duty is often payable at the
port of entry (like the airport). This duty rate varies based on nature of
items.
Octroi is tax applicable on goods entering in
to municipality or any other jurisdiction for use, consumption or sale. In
simple terms one can call it as Entry Tax.
Custom Duty - Objectives
The customs duty is levied, primarily, for
the following purpose:
·
Restricting
Imports for conserving foreign exchange.
·
Protecting
Indian Industry from undue competition.
·
Prohibiting
imports and exports of goods for achieving the policy objectives of the
Government.
·
Regulating
exports.
·
Prevent
Smuggling.
·
Facilitate
implementation of laws relating to Foreign Trade Act, Foreign Exchange
Regulation Act, Conservation of Foreign Exchange, Prevention of Smuggling Act,
etc.
8.
Excise Duty
An excise or excise duty is a
type of tax charged on goods produced within the country. This is opposite to
custom duty which is charged on bringing goods from outside of country. Another
name of this tax is CENVAT (Central Value Added Tax)
If you are producer / manufacturer of goods
or you hire labor to manufacture goods you are liable to pay excise duty.
9.
Anti Dumping Duty
Dumping is said to occur when the goods are
exported by a country to another country at a price lower than its normal
value. This is an unfair trade practice which can have a distortive effect on
international trade. In order to rectify this situation Central Govt. imposes
an anti dumping duty not exceeding the margin of dumping in relation to such
goods.
Other Taxes
10. Professional
Tax
If you are earning professional you need to
pay professional tax. Professional tax is imposed by respective Municipal
Corporations. Most of the States in India charge this tax. This tax is paid by
every employee working in Private organizations. The tax is deducted by the
Employer every month and remitted to the Municipal Corporation and it is
mandatory like income tax.
The rate on which this tax is applicable is
not same in all states.
Profession
Tax Rates, Gujarat-wrong table
Slab(Rs.) Rate of Tax (per month)
- less than 3000 Zero
- 3000 to 5999 Rs. 20
- 6000 to 8999 Rs. 80
- 9000 to11999 Rs. 150
- 12000 or more Rs. 200
Liability to
Pay
In case of Salaried and Wage earners, the
Professional Tax is liable to be deducted by the Employer from the Salary /
Wages of the employee and the Employer is liable to deposit the same with the
state government. In case of other Individuals, this tax is liable to be paid
by the person himself to the State Government.
Deductible
for the purpose of Income Tax
The Professional Tax paid to the State
Government is allowed as a deduction under Section 16 of the Income Tax Act and
Income Tax on the Balance Amount is levied as per the Income Tax Slab Rates in
force.
11. Municipal
Tax
Municipal Corporation in every city imposed
tax in terms of property tax. Owner of every property has to pay this tax. This
tax rate varies in every city.
12. Entertainment
Tax
Tax is also applicable on Entertainment; this
tax is imposed by state government on every financial transaction that is
related to entertainment such as movie tickets, major commercial shows
exhibition, broadcasting service, DTH service and cable service.
13. Stamp Duty,
Registration Fees, Transfer Tax
If you decide to purchase property than in
addition to cost paid to seller. You must consider additional cost to transfer
that property on your name. That cost include registration fees, stamp duty and
transfer tax. This is required for preparing legal document of property.
In simple sense this tax is imposed on the
handing over of the title of property ownership by one person to another. It
incorporates a legal transaction fee & stamp duty. This amount varies
from property to property based on cost.
14. Education
Cess , Surcharge
Education cess is deducted and used for
Education of poor people in INDIA. All taxes in India are subject to an
education cess, which is 2% of the total tax payable. The education cess is
mainly applicable on Income tax, excise duty and service tax.
Surcharge is an extra tax or fees that added
to your existing tax calculation. This tax 1% is applied on tax amount.
15. Wealth Tax
Wealth tax is a direct tax, which is charged
on the net wealth of the assesses. Wealth tax is chargeable in respect of Net
wealth corresponding to Valuation date.Net wealth means all assets less loans
taken to acquire those assets. Wealth tax is 1% on net wealth exceeding 30
Lakhs (Rs 3,000,000). So if you have more money, assets you are liable to pay
tax.
16. Toll Tax
At some of places you need to pay tax in
order to use infrastructure (road, bridge etc.) build from your money given to
government as Tax. This tax is called as toll tax. This tax amount is very
small amount but, to be paid for maintenance work and good up keeping.
So in total you pay 20 different taxes in
direct or indirect way.
References
www.finotax.com
www.moneyexcel.com
www.wikipedia.com
=====================================================================================
Advertisement
- If you don't Register Your Business then Go and Register First. Its Free.