Basics of Indian Taxation- Overview of Taxes in India

Overall Understanding of Taxes In India

Every governments need fund for operation.  Starting from the construction and maintenance of roads till the remuneration for the officials, government needs fund.  Where do these funds come from?  As they are keep on spending on one thing or the other, the government treasuries could not have any never ending treasures with them.  So we, the citizen of our country need to contribute for funds for the proper functioning of our government.  And we are directly and indirectly contributing to these funds even if we are aware or not. We pay taxes. These taxes form the funds for governments.  In fact, its like a cycle.  The government spends funds for our convienience and well being, and we pay back the funds as several kinds of taxes to government to spend further.

Why Taxes Are Needed 

 

      The word tax means a levy on something.  This something could be income, wealth, sales or some other thing. And it could be imposed on individuals or organisations. Whatever it is, the core point is that a tax is a levy that is imposed by some statutes in the country. The laws in a country establishes from whom and from what a tax is ought to be collected. 

Different Types of Taxes in India

      A tax could be a direct tax or an indirect tax.  A tax could be said to as a direct tax when it is paid directly by the person on whom the tax is imposed.  The word person indicates the meaning as is defined in a country’s law.  The tax which is not a direct tax is indirect tax. 

To make it more clear, consider the tax that should be paid on one’s income. The same should be paid to the government directly by the person on whose income the tax is levied.  At the same time, in the case Sales Tax, tax on the goods being sold is collected by the sellers and then transferred to the government which makes it indirect. Sometimes, the term ‘duty’ is being used to express the same meaning as in the case excise duty, customs duty etc.  Duty as in this context, denotes something that is required to pay out of legal obligation. 

Types of Taxes in India

In India, there are many kinds of taxes are being levied and some of them are: 

  • Income Tax
  • Wealth Tax
  • Sales Tax
  • Value Added Tax
  • Service Tax
  • Secutities Transaction Tax
  • Divident Tax

Income Tax in India

Income Tax is the most important tax in the above list and is leviable on the income earned by a person (as defined by the law, and is different from the dictionary meaning of the term) and to be paid by the same to the government and is charged as per the Income Tax Act and Rules prevailing in the country, during the period in which the income is earned.

Wealth Tax in India

Wealth Tax as the name indicates, is taxed upon a person’s overall wealth assessed as per the prevailing laws in the country and just like incometax, it also provides for some basic expemptions.

Sales Tax in India

The Sales Tax is something most of the people in the country pays as it is the tax charged on the goods being sold out and is collected by the seller at the time of sales and there after paid to the government.

Value Added Tax  in India

Value Added Tax is the tax paid by the original producer on the consumption of the goods upon transfer of the goods to the ultimate consumer. The ultimate consumer is paying the actual cost of the goods plus the value added as tax.

Tax Deduction Tips : Types of Medical Expense Tax Deductions

Security Transaction Tax in India

Security Transaction Tax is the tax levied on all the transactions done in the stock exchanges of India

Dividend Tax in India

Dividend Tax is the tax that should be collected by the corporate entities at the time of paying dividend to its share holders so that the dividend amount will not be taxable in the hands of shareholders.

There are a few more types of taxes, all of them effected by some laws and rules in the country, with proper legal frameworks. And it is always a good idea to be aware of these tax assessments and rates and be better citizens. The better awareness, the better well being.

2 comments

H P Roychoudhury profile image

H P Roychoudhury 5 years ago from Guwahati, India

A responsible citizen should pay Taxes for the development of the country. But no one should miss use the tax money for personal gain.


LensMan999 profile image

LensMan999 3 years ago from Trans-Neptunian region Author

Ya, I toally agree with you. All citizens should start thinking in this manner for a better society.

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