TAX
- A charge or a sum of money levied on personor property for the benefit of state.
- It is a payment to Government.
- It is a kind or charge imposed by the stateupon the citizens.
- Profit = Revenue – Expenses.
Types of Taxes:
Taxes are of two distinct types, direct and indirect taxes.
The difference comes in the way these taxes are implemented. Some are paid
directly by you, such as the dreaded income tax, wealth tax, corporate tax etc.
while others are indirect taxes, such as the value added tax, service tax,
sales tax, etc.
1. Direct Taxes
2. Indirect Taxes
But, besides these two conventional taxes, there are also
other taxes that have been brought into effect by the Central Government to
serve a particular agenda. ‘Other taxes’ are levied on both direct and indirect
taxes such as the recently introduced Swachh Bharat Cess tax, Krishi Kalyan
Cess tax, and infrastructure Cess tax among others.
1) Direct Tax:
Direct tax, as stated earlier, are taxes that are paid
directly by you. These taxes are levied directly on an entity or an individual
and cannot be transferred onto anyone else. One of the bodies that overlooks
these direct taxes is the Central Board of Direct Taxes (CBDT) which is a part
of the Department of Revenue. It has, to help it with its duties, the support
of various acts that govern various aspects of direct taxes.
Some of these acts are:
- Income Tax Act:
This is also known as the IT Act of 1961 and sets the rules
that govern income tax in India. The income, which this act taxes, can come
from any source like a business, owning a house or property, gains received
from investments and salaries, etc. This is the act that defines how much the
tax benefit on a fixed deposit or a life insurance premium will be. It is also
the act that decides how much of your income can you save through investments
and what the slab for the income tax will be.
- Wealth Tax Act:
The Wealth Tax Act was enacted in 1951 and is responsible
for the taxation related to the net wealth of an individual, a company or a
Hindu Unified Family. The simplest calculation of wealth tax was that if the
net wealth exceeded Rs. 30 lakhs, then 1% of the amount that exceeded Rs. 30
lakhs was payable as tax. It was abolished in the budget announced in 2015. It
has since been replaced with a surcharge of 12% on individuals that earn more
than Rs. 1 crore per annum. It is also applicable to companies that have a
revenue of over Rs. 10 crores per annum. The new guidelines drastically
increased the amount the government would collect in taxes as opposed the
amount they would collect through the wealth tax.
- Gift Tax Act:
The Gift Tax Act came into existence in 1958 and stated that
if an individual received gifts, monetary or valuables, as gifts, a tax was to
be to be paid on such gifts. The tax on such gifts was maintained at 30% but it
was abolished in 1998. Initially if a gift was given, and it was something like
property, jewellery, shares etc. it was taxable. According to the new rules
gifts given by family members like brothers, sister, parents, spouse, aunts and
uncles are not taxable. Even gifts given to you by the local authorities is
exempt from this tax. How the tax works now is that if someone, other than the
exempt entities, gifts you anything that exceeds a value of Rs. 50,000 then the
entire gift amount is taxable.
- Expenditure Tax Act:
This is an act that came into existence in 1987 and deals
with the expenses you, as an individual, may incur while availing the services
of a hotel or a restaurant. It is applicable to all of India except Jammu and
Kashmir. It states that certain expenses are chargeable under this act if they
exceed Rs. 3,000 in the case of a hotel and all expenses incurred in a
restaurant.
- Interest Tax Act:
The Interest Tax Act of 1974 deals with the tax that was
payable on interest earned in certain specific situations. In the last
amendment to the act it was stated that the act does not apply to interest that
was earned after March 2000.
