direct and indirect taxes in india pdf

Direct and indirect taxes in india pdf

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Direct and Indirect Taxes in India

Direct Tax Framework

Direct Tax Framework

Direct and Indirect Taxes in India

This revenue is generated through two types of taxes — direct and indirect taxes. While almost everyone is aware of direct taxes in India that are levied by the government such as income tax is a form of direct tax, most are unsure about the latter. Indirect tax can be defined as a type of tax where the incidence and impact of taxation does not fall on the same entity.

It is collected by the government from an intermediary such as a retailer or a manufacturer. The eventual tax amount is paid by the buyer of the goods and services. To put it simply, indirect taxes are those taxes that can be shifted from one individual to another.

It is not levied directly on the income of the taxpayer, but is levied on the expenses incurred by them. Some examples of indirect taxes include sales tax, entertainment tax, excise duty, etc.

There are 7 main types of indirect taxes in India. However, after the implementation of GST , these taxes are streamlined into one singular tax to reduce hassles of compliance.

Not industry-friendly: By charging raw materials and goods, indirect taxes increase the cost of production and impairs the competitive capacity of industries. This in turn discourages industries to expand. Want to know your taxes? Access our easy to use tax calculator , and plan your finances. What is indirect tax? Types of indirect taxes in India There are 7 main types of indirect taxes in India. Service Tax: A tax levied on the services provided by an entity and paid by the recipient of the services.

Service tax falls under the ambit of the Central Government, meaning the central government it is collected by and deposited with the central government. Excise duty: Tax levied on the goods produced or manufactured in India. It is a tax on manufacturing which is paid by the manufacturer, who in turn recovers the amount from his customers. Goods sold directly to the customers are levied VAT, which is exacted by the respective state governments on intra-state sales, as well as Central Sales Tax, which is collected by the Central Government on inter-state sales.

Custom Duty: A tax levied on the goods which are imported into India. In some cases, it is also applicable on the goods being transported out of India. Stamp Duty: A tax levied on the transfer of immovable property located in the state.

It is charged by the State Government and varies in rates. It is also applicable on all legal documents. Entertainment tax: Charged only by the respective state governments, this tax is levied on all financial transactions related to entertainment. Examples include video games, movie shows, amusement parks, arcades, sports activities, etc.

Advantages Indirect taxes have a number of benefits and advantages. Some of them are: The poor can contribute: The less economically stable population of the country are often exempted from most direct taxes.

However, with indirect taxes, the government can reach the poor sections of the society as well. Equitable: Indirect taxes are also levied on the upper rungs of society through taxes on goods and services consumed by only the rich.

Luxury tax is another example of equitable taxation. Convenient: Indirect tax is usually charged in small amounts and is paid only while making purchases. It is also included in the final price of a good or service. Collection of indirect tax happens automatically when goods are sold and purchased. Broad-based: Indirect taxes are spread out evenly on a wide range of goods and services.

This way the taxpayer is not burdened by a heavy direct taxation which might impact their economic and social life. Disadvantages The flip side of the coin, these are the disadvantages of indirect taxes: Regressive: Since there are multiple forms of indirect taxes, some of them may bridge the gap between the rich and the poor, there are others which directly target subsistence goods. For example, the salt tax is applicable for everybody equally. Thus implying the rich and the poor have to pay the same amount.

However, the impact of this penalty will be higher on the poor than the rich Raises prices unduly: The process of indirect taxes is sometimes cumulative. On a point-based transaction system, every middlemen tends to charge their own service tax, resulting in the price of the commodity to increase. TAGS: financial planning tax savings. Know More. Calculate Premium. Appreciate the Woman in your Life. Date of Birth. Email ID.

Direct Tax Framework

Finance Minister Nirmala Sitharaman introduced new slabs and reduced the tax rate for different slabs for an individual income up to Rs 15 lakh per annum, if a taxpayer opts for foregoing exemptions and deductions. The new tax regime will be optional and the taxpayers will be given the choice to either remain in the old regime with exemptions and deductions or opt for the new reduced tax rate without those exemptions. Under the proposal, people with an annual income of Rs 5 lakh to Rs 7. The taxability of income upto 5 lacs is not clear right now. The new regime will be optional and the people can continue with old regime if they desire so. There are about tax exemptions and deductions under income tax act and 70 of them are being removed in the new simplified tax regime, while the remaining will be reviewed and examined in due course.

GST is a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services at the national level. Note: Given is an indicative list of items, for details Click Here. Tax incidence of a company depends on the residential status of the company,i. Applicability: Caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders. Popular: fdi policy , taxation in india , major investors.

Direct Tax Framework

The Government of every country requires funding to aid it in carrying out its necessary functions and duties. In exchange for providing these amenities, a government generates the revenue required for them by taxing its citizens. To make this process efficient, every country has a proper taxation process laid out by its government. India, with its wide distribution of income earners and sources of revenue, is no different. It places value in the importance of taxes across the board and marks an important distinction between its major types of taxes.

The citizens of India cannot shy away from paying taxes. The Government of India imposes two types of taxes on its citizens — direct and indirect taxes. Direct taxes : These taxes have to be paid directly to the government and cannot be transferred to anyone else. Different acts govern these taxes. Indirect taxes : These taxes are imposed on all the goods and services, and not on income and profits.

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, Description: In this case, the service provider pays the tax and recovers it from the customer.

What is the importance of taxes in India?

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  • Maximilian G. 22.04.2021 at 21:16

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  • Queprovsatfge1976 26.04.2021 at 06:33

    The some important direct taxes imposed in India are as under: Income Tax: Income Tax Act, imposes tax on the income of the individuals or Hindu undivided.

  • Anita B. 29.04.2021 at 04:53

    Finance Minister Nirmala Sitharaman introduced new slabs and reduced the tax rate for different slabs for an individual income up to Rs 15 lakh per annum, if a taxpayer opts for foregoing exemptions and deductions.


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