INDIAN TAXATION SYSTEM

Official websites:

Ministry of Finance: finmin.nic.in/

Department of Revenue: dor.gov.in/

Income Tax Department: incometaxindia.gov.in/Pages/default.aspx

Constitution of India allows both the Central and the State Governments to levy taxes.All comes under Department of Revenue, under the Ministry of Finance.

Authorities responsible for planning ploicies are:

  • Central Board of Direct Taxes (CBDT),
  • Central Board of Excise and Customs (CBEC).

According to Constitution no authority of law (courts and other judiciaries) can levy/collect taxes.

Article 246 of Indian Constitution:

  • List I mentions areas under Central Parliament.
  • List II mentions areas under State Legislatures.
  • List III mentions areas which are both under Parliament and Legislatures.

Central Government:

  • Income tax,
  • Corporate taxes,
  • Import/Export duties,
  • Capital gains taxes,
  • Stamp duties (transaction in Stock Exchange).

Total taxes cllected during Current year: dor.gov.in/revenue_ctc

State Government:

  • Central Sales Tax
  • Value Added Taxes
  • Stamp Duty
  • Empowered Committee of State Government
  • Goods and Service Tax
  • IT initiatives
  • Goods entry in state territory taxes, Duties on agricultural income, tax on mineral rights, land revenue

Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.

For common man (https://www.youtube.com/watch?v=oWxiq-wfvT8)

Income Tax Act of 1961

Income from salary

Income from business or profession

Income from house and property

Income from Capital gains

Income from other sources

Rate of taxes are changed every year by Parliament in Finance Act which is called annual budget.

In terms of collection taxes are of two types: Direct taxes and Indirect taxes.

DIRECT TAXES: are collected directly from the tax payers and they have to be paid by the persons on whom it is imposed.

  • Income tax: TDS is charged to whosoever is earning above tax exemption limit.
  • Wealth tax: This is levied if your net wealth exceeds Rs 30 Lakhs at rate
  • Property/Capital gains Tax: Levied on capital gains arrived by selling property and stocks. Tax rates are different for long term and short term capital gains.
  • Gift tax / Inheritance tax: Above certain amount (currently 50,000 Rs) received from any person is subjected to gift tax as income under “other sources”. Exemptions are marriage gifts, inheritance property/money and money received from relatives.
  • Corporate tax: Companies operating in India are taxed as per the corporate tax rate on their income. This tax is one of the major sources of revenue for government.

INDIRACT TAXES: Impact and incidence of indirect Taxes fall on different persons as opposed to direct taxes where impact and incidence is on the same person. These taxes are recovered from different groups of people but the liability remains with the person who collects it. Tax payer recovers the indirect taxes paid from their consumers and clients and finally pays it to government

  • Service Tax : Service providers in India are subject to service tax, which is charged on the aggregate amount received by the service provider. Services like leasing, internet/voice, transport, etc are subject to service tax.
  • Custom Duty : Custom duties are indirect taxes which are levied on goods imported to/exported from India. There are different rules for different types of goods and sectors. Government keeps on changing these rates so as to promote import/export of specific goods.
  • Excise Duty : Excise duties are indirect taxes which are levied on goods manufactured in India for domestic consumption. Like custom duty, there are a number of rules which keep on changing as per government discretion.
  • Sales Tax and VAT : Sales tax is levied by the government on sale and purchase of products in Indian market. As customers, whatever you buy from the market, you pay sales tax on it. Now, sales tax is supplemented with new Value Added Tax so as to make it uniform across country.
  • Security Transaction Tax (STT) : STT is levied on transactions (sale/purchase) done through the stock exchanges. STT is applicable on purchase or sale of various financial products like stocks, derivatives, mutual funds etc.

Source: http://www.business-standard.com/article/pf/10-taxes-you-should-know-about-114041100175_1.html  For more detailed info please visit following website:                                                       http://indiainbusiness.nic.in/newdesign/index.php?param=investment_landing/293/6  http://www.incometaxindia.gov.in/Pages/default.aspx

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