Overview

What Is Taxation

India is a land of diversity – be it in culture, religion, language or geography. The Indian constitution recognises this diversity and provides for equal treatment of all citizens. The concept of taxation is also based on the same principle of equality.

India is a federal republic with 29 states and 7 union territories. The Constitution of India gives the power to levy taxes to both the central government and the state governments. The taxes are levied on individuals, businesses and transactions.

What is taxes?

Taxation in India refers to the levying of taxes by the government of India on individuals and businesses. Income tax, corporate tax, Goods and Services Tax (GST) are some of the major taxes levied in India.

The government of India uses taxes to finance its operations and developmental activities. Tax revenue forms a significant part of the government's revenue

Types of taxes:

The Indian taxation system can be broadly classified into two types of taxes: direct taxes and indirect taxes.

Direct Taxes:

Direct taxes are taxes which are levied on the income of an individual or an organisation. These taxes are also known as income taxes.

The following taxes come under the category of direct taxes: Income tax, Corporate tax, Wealth tax, Capital gains tax.

Indirect Taxes:

Indirect taxes are taxes which are levied on the sale of goods and services. These taxes are also known as consumption taxes.

The following taxes come under the category of indirect taxes: Sales tax, Service tax, Value Added Tax (VAT), Customs duty, Excise duty, Entertainment tax, Goods and Service Tax (GST).

What is Income Tax?

Income tax is the major tax levied in India. Individuals and businesses are required to pay income tax on their earnings. The profits tax quotes range relying at the profits bracket. Corporate tax is another major tax levied in India. Companies are required to pay company tax on their profits. We at DSSD offers best possible way to file the taxes. The corporate tax rates vary depending on the type of business and the profitability.

What is Goods and Service Tax (GST)

GST is a value added duty levied on the trade of goods and services. It is a consumption tax which is levied on the final consumption of goods and services. GST is levied on the value of the good or service at each stage of the force chain. GST is a destination based tax and is levied on the consumption of goods and services in the state where they are consumed.

Taxation in India

The tax structure in India is quite complex and it keeps changing from time to time. As a result, it is very difficult for a layman to understand the tax system in India.

The tax rates in India are also very high. The income tax rate for individuals is 30% and the corporate tax rate is 40%. The indirect taxes are also very high. For example, the VAT rate in Delhi is 20%.

The total tax revenue of the government is about 12% of the GDP. This is one of the highest in the world. The high tax rates and the complex tax laws have led to a situation of tax evasion and avoidance in India. It is estimated that only 1% of the population pays income tax in India.

The black money or the unaccounted money in India is estimated to be around Rs. 90 lakh crore. This is a huge amount of money which is not contributing to the development of the country. The government has taken some measures to tackle the problem of black money.

Measures to minimize black money

• The government has set up a special task force to track down the black money. The government has also introduced a scheme called ‘Income Declaration Scheme’ under which the people can declare their undisclosed income and pay taxes on it.
• The government has also passed the Black Money Act to deal with the issue of black money. Under this Act, the people who have black money stashed abroad will be penalised.
• The government has also introduced the concept of ‘e-assessment’ under which the income tax return can be filed online. This will help in reducing the compliance cost.
• The government has introduced the concept of ‘minimum alternate tax’ under which the companies which have high profits but pay low taxes will have to pay a minimum alternate tax.
• The government has also reduced the corporate tax rate from 30% to 25%. This will help in attracting more foreign investments.
• The government has also increased the threshold limit for the payment of income tax. The government has also introduced various deduction and exemption schemes to reduce the tax burden. We at DSSD offers best finance courses in Delhi.
• The government has also introduced the concept of ‘carry forward and set off of losses’. Under this concept, the losses of a company can be carried forward for a period of 8 years and can be set off against the profits of the company.