What is Tax?

Taxes are imposed by governments on their people to come up with income for undertaking comes to spice up the economy of the country and to lift the quality of living of its people. The authority of the govt to levy taxes in India comes from the Constitution of India, which allocates the potential to levy taxes to the Central and State governments. All taxes levied inside India ought to be backed by a related law elapsed by the Parliament of the State Legislative Assembly.

What is a Tax?

Tax is imposed on an oversized form of monetary gains stemming from payment, profits from business, property rental, etc. There are wealth taxes, sales taxes, property taxes, payroll taxes, value-added taxes, service taxes, etc 

Types of Taxes 

 There are mainly two types of taxes, that are more subdivided into alternative classes. The 2 major classes are direct tax and indirect tax. There are minor tariff taxes that comprise completely different sub-categories. Among the income tax Act, there are completely different acts that govern these taxes. 

Direct Tax

  • Direct tax is a tax that is to be paid to the govt by the individual or legal entity. Direct taxes are unnoticed by the Central Board of Direct Taxes (CBDT). Direct taxes can't be transferred to the other individual or legal entity.  

Sub-categories of Direct Taxes are as follows 
Income tax:

Income tax is the tax that's imposed on the annual income or the profits that are directly paid to the govt. Every person who earns any type of income is prone to pay income tax. For people who are below 60, the tax exemption limit is Rs.2.5 lakh once a year. For people between the age of sixty and eighty, the tax exemption limit is Rs.3 lakh. For people above the age of eighty, the tax exemption limit is Rs.5 lakh. There are completely different tax slabs for various income amounts. 

Capital gains:

Capital gains tax is imposed on the sale of a property or cash received through an investment. It might be from either short or long-run capital gains from an investment. This includes all exchanges created similarly that are weighed against their worth. 

Securities transaction Tax:

Securities transaction Tax simply termed STT is imposed on the stock market and securities trading. The tax is levied on the value of the share yet as securities listed on the ISE (Indian Stock Exchange). 

Prerequisite Tax:

These are taxes imposed on the various advantages and perks that are provided by a corporation to its staff. The advantage of the benefits and perks, whether not it's official or personal, is to be outlined. 

Corporate tax:

The income tax paid by a corporation is outlined because of the company tax. It's supported by the various slabs that the revenue falls beneath. The sub-categories of company taxes are as follows: 

  • Dividend distribution tax ( DDT):

This tax is levied on the dividends that firms pay to the investors. It applies to the total or gross income that a capitalist or an investor receives from the investment. 

  • Fringe benefits tax (FBT):

The FBT tax is imposed on the advantages that an employee receives from the corporate. This includes expenses associated with accommodation, transportation, leave allowance, recreation, pension contribution by the employee, Employee welfare, stock ownership plan (ESOP), etc. 

  •  Minimum alternative Tax (MAT):

The firms pay the IT Department through MAT which is ruled by Section 115JA of the IT Act. Firms that are exempt from MAT, are people who are within the power and infrastructure sectors.

Indirect tax

Taxes that are imposed on services and goods are stated as indirect taxes. Indirect taxes are collected by the vendor of the service or product. The tax is else to the value of the products and services. It will increase the value of the product or service. There's only 1 indirect tax levied by the govt presently. This can be referred to as GST or the Goods and Services Tax. 
 
GST: It is a consumption tax that's levied on the availability of services and goods in India. Each step of the production process of any product or added service is subject to the imposition of GST. it's imagined to be refunded to the parties that are concerned within the production method (and not the ultimate consumer). 
 
GST resulted in the elimination of other forms of taxes and charges like worth else Tax (VAT), tariff, Central value-added Tax (CENVAT), yet as customs and excise taxes. The goods or services that aren't taxed beneath GST are electricity, alcoholic drinks, and rock oil merchandise. These are taxed as per the previous tax regime by the individual state. 

Benefits of Taxes 

The benefit of taxes is to provide for the government. With funds for commerce without inflation. Taxes are utilized by the government. For an expansion of functions, some of them are: 

  • Funding of public infrastructure 
  • Development and welfare projects 
  • Defense expenditure 
  • Scientific analysis 
  • Public insurance 
  • Salaries of state and government staff 
  • Operation of the government.  
  • Public transportation  
  • Unemployment blessings 
  • Pension schemes  
  • Law enforcement  
  • Public health  
  • Public education 
  • Public utilities like water, energy, and waste management systems 

Conclusion

The payment of tax is helpful on multiple levels together with state development of the state, betterment of infrastructure, the uplift of the society, and even welfare activities for the state. 
The other types of taxes that are minor revenue generators are property tax, entertainment tax, registration fees, stamp duty, transfer tax, professional tax, and also road tax.

Frequently Asked Queries

How do I know what proportion of income tax I should pay? 

The varied taxation slabs are mentioned here. you'll conjointly visit the website of the taxation Department, Check for more information for Incometax, to understand additional concerning your taxation liability. 

What should be kept in mind when filling up the ITR form or challan? 

The main points that ought to be mentioned within the challan are the amount of tax, Mode of payment of tax, Head of payment, Assessment year, PAN, and type of payment. 

What's the distinction between taxable income and exempt income? 

Taxable income is answerable for tax. Exempt income is income that's granted exemption from tax by the income tax Department.