Taxes are imposed by government to collect funds from people of country to continue running projects and boost the economy too. Another reason to impose tax on people to left their living standard though useful financial policies. Government of India divides tax system as per constitution of our county and distributes rights to state government too, allow them to design their own structure and policy regarding this system. All tax related policies implemented by government after approval from parliament, state Legislature and advice from constitution experts.
Basically, there are two types of taxes imposed by government, indirect and direct tax. One of the basic but important differences is in implementation of these taxes. Some of them are paid as service tax, sales tax and value added tax as indirect tax.
In case of direct tax, individual need to pay for corporate tax, wealth tax, income tax and other taxes.
a. Indirect Tax
b. Direct Tax
Apart from these two basic taxes, government imposed several other taxes to fulfill some specific projects and policies. Other popular taxes are infrastructure Cess tax, Swachh Bharat Cess tax and Krishi Kalyan Cess tax.
As, we know that direct tax are paid directly by the respective individuals as per policies. This type of tax cannot be transferred onto any other individual and mandatory to pay to avoid any legal issues. Department of Revenue bodies Central Board of Direct Taxes (CBDT) monitor all the policies and records in this category. Central Board of Direct Taxes (CBDT) also offers support for taxpayers and resolves their issues and avails latest policy related information.
This tax policy came in effect in 1951, and policy is fully liable for imposing tax on overall income of any individual or entire joint family. In 2015 budget government change this policy and bring new policy that will ask for 12% tax on revenue of more than 1 crore. This policy will be same for companies that have revenue of 10 crore or more.
This is one of the first taxes that government imposed in India. This tax is also known as IT acts of 1961. Income that comes from property, business, owning a house, salaries or earned through any other investment policies. Taxpayers can save their amount by investing it on insurance policies and other beneficial offers.
This policy is also known as Interest tax act 1947 that brings rule to apply tax from different resources and bank accounts. As per new policy that government has brings in 2000, this rule will not be applicable on amount deposited after 2000.
Authorities brings this policy in 1958 and as per policy, if any individual receive rewards, valuable gifts, monetary and other precious rewards then he/she need to pay 30% tax of value of gift. Government removes this law in 1998 and makes exchange of gifts quite easy. As per latest rule, if individual receive gifts items worth less than 50,000 from their friends and family members then they will be free from tax pay otherwise they have to tax as per price of gift items.
To impose tax on individual or organization expenses government bring this rule in 1987. This tax will be effective if you are spending more than 3000 on hotel booking or paying restaurants bills. This law is not effective in Jammu and Kashmir.
Corporate Tax :- Business organization pays this tax on basis of revenue that they have earned through company policy. There are different provision under this policy through which if organization is earning up to 1 crore then company will be free from this tax on the other hand if revenue is more than 1 crore then tax is mandatory to pay for company.
There are four different types of corporate tax, explained below,
1. Minimum Alternative Tax: - Under Section 115JA of the Income Tax Act companies need to pay minimum 18.5% of total revenue. If company belongs to power and infrastructure sector then organization does not need to pay MAT tax.
2. Banking Cash Transaction Tax: - This tax was on flow between 2005-2009, as per policy every bank transaction would be taxed as rate of 0.1%. This is another tax that government imposed on transaction for certain time.
3. Fringe Benefits: - This tax will apply on all facilities that employer will offer to its employee. Some common facts that come through this tax are employee welfare, accommodation, entertainment, employer travel expenses, Employer Stock Option Plans (ESOPs), employees retirement funds and other business related expenses.
4. Dividend Distribution Tax: - Government brings with 2007 union budget to impose tax on amount that company pay to their investors. Tax will be depending on company annual turnover or revenue.
Capital Gain Tax :- Individual need to pay this tax when they earn money from investment policies whether it is long term policies or short term policies. Short term refer to investment of up to 36 month or three years and long term investment refers to investment plans of more than three years. If have earned benefits from long term investment plans then you have to pay up to 20% as tax of earned amount.
Securities Transaction Tax :-If you are businessmen and spend your money on share market and want secure trading and transaction then you have to spend at least some money. This is also a secure transaction that you receive; this type of transaction is known as securities transaction tax. Tax amount will be decided as per your transaction and share prices.
Perquisite Tax :- As per government policy this tax will be imposed on employer when he spends on amenities of employee by gifting them house, car of company use and other useful facilities like mobile bill and fuel bills.
Income Tax :- This is one of the most complicated and most popular taxes that government imposed on basis of annual earning of individual or organizations. As per government policies there are various provisions and rules as per age and other conditions.
As we have already discussed, taxes that imposed on services and goods known as direct tax. These taxes are not directly imposed by government on individuals than on Production Company. One of the best examples of indirect tax are sales tax, value added tax (VAT) and taxes on imported goods. These taxes come with adding up on actual price.
Value Added Tax (VAT) :- Value added tax is one of the popular tax systems in India and known as commercial tax and is application of complementary drugs and food items because these products are rated as zero. This tax will also not be imposed on exports products.
Sales Tax :- Government imposed this tax on sale of products. Tax will be imposed whether products is manufactured in India or any other countries. One of the major issues with this tax is that it can be imposed for single time that means if product is being sale on second time then no tax will be imposed. Sales tax is one of the biggest sources of revenue of state governments. All state government follows their own policies to implement this law.
Custom Duty :- Anything that you will buy from other countries then this tax will be imposed on those products. One of the main motives of this tax is that all products that bought from other countries are taxed and legal. Custom duty will be imposed on all condition whether you bring products through sea, land or air.
Service Tax :- This type of tax imposed on services offered by respective organization. This tax is applicable on all service providing companies than on products. If the organization is self service provider then tax will be imposed for single time.
GST (Goods and Sales Tax) :- GST is one of the biggest reforms after independence in Indian tax system. As we all know that GST is consumption based tax system, where tax will be decided as per consumption of products. This tax will help government to handle tax related in much effective way.
Excise Duty :- Government of India imposed this tax on all products product and manufactured in India. This tax is completely different from custom duty tax because this tax is applicable on products that manufactured in India. This tax is also known as CENVAT or Central Value Added Tax.
As we know that indirect and direct taxes are two elementary types of taxes that state and central government bodies imposed of individuals and corporate sectors. To collect extra revenue for welfare of people government imposes some other taxes as per advice and guideline of finance ministry.
Entertainment Tax :- This is one of the common taxes that government commonly imposed on entertainment sector. Tax is collected on the earning through movies shows, film festival shows, commercial shows, live stage performances. Generally this tax is imposed by government on recreational parlours, amusement, feature films, television series and exhibitions.
Professional Tax :- This is another common tax that state government imposed on professionals like company secretary, doctor, chartered accountant or lawyer. Professionals need to pay tax as per policy of their states.
Registration Fees, Transfer Tax and Stamp Duty :- Stamp Duty, Registration fees and transfer tax are essential part of property tax. In other words, when someone buys any property then he/she need to pay all these specified taxes while completion of procedure.
Property Tax and Municipal Tax :- This tax is also known as real estate taxes that municipal corporation imposed on individual who is resident of that city or area. Municipal corporations imposed this tax for welfare of urban areas and to boost facilities in those areas.
Road Tax and Toll Tax :- Government offers infrastructure and development of bridge, road and to maintain that tax imposed on vehicles as per government policies.
Krishi Kalyan Cess :- This is the latest cess that government of India brought into effect from 2016 june. This cess is to support all the formers who work consistently for wellness of country. This will help government to boost facility for formers to help them to boost their production. Krishi Kalyan cess will be 0.5% of the total amount.
Swachh Bharat Cess :- Government of India brings this cess from 15 November 2015 to bring reform in cleaning and this tax will be imposed on all taxable services and service provider need to pay 0.5% of the total amount. Collected amount will be used in Swachh Bharat Initiatives to promote cleaness and other government campaigns in country. This tax is completely different from service tax and other taxes.
1. Entry Tax
2. Infrastructure Cess
3. Wealth Tax
4. Gift Tax
5. Education Cess/Surcharge
In our country there are several people who oppose this tax system but its not so true because tax system has its own advantages that help government to launch new policy and continue previous ones. Tax is one of the main factors that help in economy boosting of our country.
Some advantages of taxes are: -
1. As per provision and policy of IT act if someone invest certain amount in certain policies then they will get freedom in income tax, but there is limit in this type of investment, so invest your money wisely.
2. If you are paying your tax regularly and submitting your tax return properly then you will various facility and ease while applying for personal loan or home loan.
There are provisions in IT act to punish person who not follow the rules and guideline of IT act. Each law has its own criteria and if someone violate rule in that case they may face strict legal activates. If someone pays tax after due dates then they need to pay penalty for this too. So always pay your tax on time to avoid any odd condition.