“Dive into the world of Indian taxation with insights into direct and indirect taxes. Explore the nuances of Income Tax, Gift Tax, Wealth Tax, and more under direct taxes. Uncover the impact of Service Tax, Value Added Tax (VAT), Customs Tax, and others as part of indirect taxes. Stay informed on the ever-evolving tax landscape.”
What is Tax
Paying taxes to the local government is an essential part of everyone’s life, regardless of where we live on the world. In India, there is a tax because the government has to collect taxes from eligible people in order to administer the country effectively.
Taxes can now be collected in a variety of ways, including state taxes, central government taxes, direct taxes, indirect taxes, and many others.
Types of Tax
In general, there are two types of taxes: direct taxes and indirect taxes. Both taxes are implemented differently. Some are paid directly, such as income tax, corporate tax, wealth tax, and so on, while others are paid indirectly, such as sales tax, service tax, Value Added Tax, and so on.
A. Direct tax
Such taxes are imposed by the government directly on a person or an entity and cannot be transferred to another individual or business. The only such federation that examines direct taxes is the Central Board of Direct Taxes (CBDT), which is controlled by the Department of Revenue. In order to carry out its duties, the CBDT is supported by a number of laws that govern various aspects of direct taxes.
1. Income Tax Act:
The Income Tax Act regulates income tax in India. The income taxed by this act may come from any source, such as gains from salaries and investments, owning a property or a residence, running a business, and so on. The IT Act specifies the tax benefits available on life insurance premiums and fixed deposits. It also determines how much of your income can be saved through investments and the tax bracket for your income tax.
2. Expenditure Tax Act
The Expenditure Tax Act, 1987 is an Act of the Indian Parliament. It applies to any expenses incurred by an individual and any charges that are implied to be chargeable spending. The Act applies to all Indian states and union territories. In a restaurant
3. Gift Tax Act
The Indian Parliament passed the Gift Tax Act in 1958. It was enacted to levy a tax on giving and receiving gifts under certain conditions outlined in the statute. These gifts can take any form, including cash, jewels, real estate, stocks, vehicles, and so on.
4. Wealth Tax Act
An act passed by the Indian Parliament in 1957 called the Wealth Tax Act authorized the imposition of a wealth tax on an individual, a Hindu Undivided Family, or a business. On a valuation date, which was the last day of March each year, the wealth tax was assessed based on a person’s net worth. All of India is subject to the Act.
5. Interest Tax
This Act of 1974 deals with the tax that was levied on interest generated in certain circumstances. The most recent update to the statute states that this statute does not apply to interest earned after March 2000.
6. Capital Gain Tax
When an individual sells assets such as stocks, real estate, or a business, this tax is levied. The tax is calculated by subtracting the acquisition amount from the selling amount.
B. Indirect Tax
An indirect tax is a tax levied on a person based on the purchase of goods and services. An indirect tax is one that is not placed directly on a person’s income. He must pay the tax in addition to the purchase price of the seller’s goods or services. An indirect tax is one that is levied on someone else. In general, indirect taxes are levied on sellers who then pass them on to the eventual consumer.
The person on whom the burden falls and the person who pays the tax are distinct under indirect taxes. These taxes must be paid to the government by the sellers (for example, manufacturers and merchants). However, because companies sell items to customers, they transfer the cost of paying the tax on to you.
1. Service Tax
The central government collects and deposits service tax on services provided by an organisation and paid by the recipient of such services.
2. Value Added Tax
VAT, or value added tax, is collected on the sale of transportable items or goods sold directly to customers. The individual state governments levy VAT on intra-state sales.
3. Excise duty
Excise duty is collected on items produced or made in India and is paid by manufacturers of various goods. Excise duty is frequently reclaimed from customers.
4. Customs tax
Customs tax is levied on items imported into India from foreign countries. It is also imposed on products being carried out of India in specific situations.
5. Entertainment tax
The respective state governments levy an entertainment tax on all financial transactions related to entertainment, such as the film industry examinations, amusement parks, video games, arcades, and competitions.
6. Stamp duty
Stamp duty is levied by the state government on the transfer of immovable property located within the state and may vary in rate. It also applies to all legal documents.
7. Securities Transaction Tax
Securities Transaction Tax is levied when securities are traded on the Indian Stock Exchange.
8. Goods and services tax
A number of indirect taxes levied by the Central and State Governments were replaced by the Goods and Services Tax (GST), a single tax structure. Under GST, the federal government and state governments each have a joint right to impose and collect taxes on goods and services.
*****
The above article has been written by Mr. Sachin Vishwakarma (CA Aspirant) and reviewed by Mr. Suyash Tripathi (Chartered Accountant) and they can be reached at sachinvishwakarma155638@gmail.com and tripathi.r.suyash@gmail.com.
Author Bio
