Tax is imposing financial charges on individual or company by central government or state government. Collected Tax amount is used for building nation (infrastructure & other development), to increase arms and ammunition for defense of country and for other welfare related work. That's why it is said that "Taxes are paid nation are made"
Direct Taxes:-
These types of taxes are directly imposed & paid to Government of India. There has been a steady rise in the net Direct Tax collections in India over the years, which is healthy signal. Direct taxes, which are imposed by the Government of India, are
Income Tax:-
Income tax, this tax is mostly known to everyone. Every individual whose total income exceeds taxable limit has to pay income tax based on prevailing rates applicable time to time.
Capital Gains Tax:-
Capital Gain tax as name suggests it is tax on gain in capital. If you sale property, shares, bonds & precious material etc. and earn profit on it within predefined time frame you are supposed to pay capital gain tax. The capital gain is the difference between the money received from selling the asset and the price paid for it.
Capital gain tax is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is charged if the capital assets are kept for more than certain period 1 year in case of share and 3 years in case of property. Short-term Capital Gains Tax is applicable if these assets are held for less than the above-mentioned period.
Securities Transaction Tax:-
A lot of people do not declare their profit and avoid paying capital gain tax, as government can only tax those profits, which have been declared by people. To fight with this situation Government has introduced STT (Securities Transaction Tax ) which is applicable on every transaction done at stock exchange. That means if you buy or sell equity shares, derivative instruments, equity oriented Mutual Funds this tax is applicable.
This tax is added to the price of security during the transaction itself, hence you cannot avoid (save) it. As this tax amount is very low people do not notice it much.
Perquisite Tax:-
Earlier to Perquisite Tax we had tax called FBT (Fringe Benefit Tax) which was abolished in 2009, this tax is on benefit given by employer to employee. E.g If your company provides you non-monetary benefits like car with driver, club membership, ESOP etc. All this benefit is taxable under perquisite Tax.
In case of ESOP The employee will have to pay tax on the difference between the Fair Market Value (FMV) of the shares on the date of exercise and the price paid by him/her.
Corporate Tax:-
Corporate Taxes are annual taxes payable on the income of a corporate operating in India. For the purpose of taxation companies in India are broadly classified into domestic companies and foreign companies.
Indirect Taxes:-
Sales Tax :-
Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by Union Government, while sales tax on intra-State sale (sale within State) (now termed as VAT) is charged by State Government.
Sales can be broadly classified in three categories. (a) Inter-State Sale (b) Sale during import/export (c) Intra-State (i.e. within the State) sale. State Government can impose sales tax only on sale within the State.
CST is payable on inter-State sales is @ 2%, if C form is obtained. Even if CST is charged by Union Government, the revenue goes to State Government. State from which movement of goods commences gets revenue. CST Act is administered by State Government.
Service Tax:-
Most of the paid services you take you have to pay service tax on those services. This tax is called service tax. Over the past few years, service tax been expanded to cover new services.
Few of the major service which comes under vicinity of service tax are telephone, tour operator, architect, interior decorator, advertising, beauty parlor, health center, banking and financial service, event management, maintenance service, consultancy service
Current rate of interest on service tax is 14%. This tax is passed on to us by service provider.
Value Added Tax:-
The Sales Tax is the most important source of revenue of the state governments; every state has their respective Sales Tax Act. The tax rates are also different for respective states.
Tax imposed by Central government on sale of goods is called as Sales tax same is called as Value added tax by state government.VAT is additional to the price of goods and passed on to us as buyer (end user). Around 220+ Items are covered with VAT.VAT rates vary based on nature of item and state.
Government is planning to merge service tax and sales tax in form of Goods service tax (GST).
Custom duty & Octroi (On Goods):-
Custom Duty is a type of indirect tax charged on goods imported into India. One has to pay this duty , on goods that are imported from a foreign country into India. This duty is often payable at the port of entry (like the airport). This duty rate varies based on nature of items.
Octroi is tax applicable on goods entering in to municipality or any other jurisdiction for use, consumption or sale. In simple terms one can call it as Entry Tax.
Excise Duty:-
An excise or excise duty is a type of tax charged on goods produced within the country. This is opposite to custom duty which is charged on bringing goods from outside of country. Another name of this tax is CENVAT (Central Value Added Tax).
If you are producer / manufacturer of goods or you hire labor to manufacture goods you are liable to pay excise duty.
Anti Dumping Duty:-
Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. In order to rectify this situation Central Govt. imposes an anti dumping duty not exceeding the margin of dumping in relation to such goods.
Other Taxes:-
Professional Tax :-
If you are earning professional you need to pay professional tax. Professional tax is imposed by respective Municipal Corporations. Most of the States in India charge this tax.
This tax is paid by every employee working in Private organizations. The tax is deducted by the Employer every month and remitted to the Municipal Corporation and it is mandatory like income tax.
The rate on which this tax is applicable is not same in all states.
Dividend distribution Tax:-
Dividend distribution tax is the tax imposed by the Indian Government on companies according to the dividend paid to a company's investors. Dividend amount to investor is tax free. At present dividend distribution tax is 15%.
Municipal Tax:-
Municipal Corporation in every city imposed tax in terms of property tax. Owner of every property has to pay this tax. This tax rate varies in every city.
Entertainment Tax:-
Tax is also applicable on Entertainment; this tax is imposed by state government on every financial transaction that is related to entertainment such as movie tickets, major commercial shows exhibition, broadcasting service, DTH service and cable service.
Stamp Duty, Registration Fees, Transfer Tax:-
If you decide to purchase property than in addition to cost paid to seller. You must consider additional cost to transfer that property on your name.
That cost include registration fees, stamp duty and transfer tax. This is required for preparing legal document of property.
In simple sense this tax is imposed on the handing over of the title of property ownership by one person to another. It incorporates a legal transaction fee & stamp duty. This amount varies from property to property based on cost.
Education Cess , Surcharge:-
Education cess is deducted and used for Education of poor people in INDIA. All taxes in India are subject to an education cess, which is 3% of the total tax payable. The education cess is mainly applicable on Income tax, excise duty and service tax.
Surcharge is an extra tax or fees that added to your existing tax calculation. This tax is applied on tax amount.
Gift Tax:-
If you receive gift from someone it is clubbed with your income and you need to pay tax on it. This tax is called as gift tax.
This tax is applicable if gift amount or value is more than 50000 Rs/- in a year.
Wealth Tax:-
Wealth tax is a direct tax, which is charged on the net wealth of the assessee. Wealth tax is chargeable in respect of Net wealth corresponding to Valuation date.Net wealth means all assets less loans taken to acquire those assets. Wealth tax is 1% on net wealth exceeding 30 Lakhs (Rs 3,000,000). So if you have more money, assets you are liable to pay tax. Note:- Wealth tax is abolished by government in budget 2015.Now onwards surcharge of 12% is applicable on individual earning 1 crore and above.
Toll Tax:-
At some of places you need to pay tax in order to use infrastructure (road, bridge etc.) build from your money given to government as Tax. This tax is called as toll tax. This tax amount is very small amount but, to be paid for maintenance work and good up keeping.
Taxes generally fall into the following broad categories:
Income tax
Payroll tax
Property tax
Consumption tax
Tariff (taxes on international trade)
Capitation, a fixed tax charged per person
Fees and tolls
Effective taxes, government policies that aren't explicitly taxes, but result in income to the government through losses to the public
TAXATION PRACTICES
Ad valorem tax is any tax that is based on the actual value of the item being taxed. Nearly any type of tax can be an ad valorem tax.
Direct tax is a tax paid by a person, as opposed to a tax levied on a business that the person indirectly pays.
Double taxation is when a tax is paid twice on the same income or item.
Indirect tax is a tax collected by an intermediary (such as a store) on behalf of the person who actually is required to pay (such as a customer)
Lump-sum tax is a tax that is a set amount, regardless of a person's wealth or an item's value.
Pigovian tax is a tax on a good or service that causes a harm to society that is not paid by the users of that good or service. It is designed to pay for the negative externalitiesof the good.
Payment in lieu of taxes is a system where an entity that is exempt from taxation makes a payment to the government instead. This payment may be mandatory or voluntary. Usually it applies to property.
Proportional tax is any tax where the tax rate is the same for all payers.
Progressive tax is a tax that charges the rich a greater percentage of their income than the poor.
Regressive tax is a tax that charges the poor a greater percentage of their income than the rich.
Single tax is a tax system that has only one tax levied.
Steering tax is a tax that aims to change the behavior of the public.
Tax Farming is where a government grants persons the right to collect taxes and turn them over to the government.
