Tax in India
Taxes are source of income for government’s earning which is used by government for different projects to help in growth of country’s economy and its people. In India, Taxes are decided by the central and state governments with local governments, such as municipalities. Government cannot impose any taxes on its wish because as per the constitution of India, all the taxes are imposed must be laws
Types of Taxes:
There are two types of Taxes in India:
• Direct Taxes
• Indirect Taxes
1) Direct Tax:
Direct tax is that tax in which tax is paid by that person on whom it is imposed. These taxes cannot be transferred by person to other person like Income tax, wealth tax etc. For the monitoring of direct taxes, government has established a body which is known as CBDT (Central Board of Direct Taxes) which is part of government’s revenue department.
Direct taxes are as per:
Income Tax Act:
Income tax Act is also known as the IT Act of 1961. This Act defines the rules and policies to govern the income tax in India. This act treats income under different heads like Income under the head Salaries, Income under the head House property, Income under the head Profit and gains from business or profession, income under the head capital gains from business, Income under the head income from other sources. This act also defines the Tax benefits which one can avail by making the investments in different products like Fixed deposit, Life insurance premium, Post office saving account etc.
2) Indirect Tax:
Indirect taxes are those taxes which are paid by person other than the person on whom it is levied. For monitoring and governance of indirect taxes government has established a body with the name of Central Board of Excise and Custom (CBEC). These taxes are levied on Goods and services. Vat (Value Added Tax), Service Tax, excise duty are some of the indirect taxes.
Examples of Indirect Taxes:
These are some of the indirect taxes are:
When tax is levied on sale of product then it is known as sale tax. This is levied on the person who sells the product however the seller of the product transfers this tax on to the person who buys that product from the seller. In India every state has their own sale tax act and they charge the sale tax rate according to those rates.
As sales tax is levied on the sale of product likewise the service tax is levied on the sale of services. But the major difference between sales tax and service tax is that Sales tax is a state level tax however service tax is a central level tax.
When goods are imported from any other country then there is some duty is levied which is known as custom duty. It is levied on the products which are imported through sea, land or Arial routes.
Excise duty is also another type of indirect tax which is levied on goods produced or manufactured in India. For Excise duty there is a different act with the name of CEA Act, 1944 (Central Excise Act).