Ø Direct Tax
Direct tax is
the tax which is charged directly on the tax payer . For e.g. property tax and
income tax . In other words direct tax is that tax that is deducted from one’s
salary . Direct taxation in India is taken care by the Central Board of
Director Taxes (CBDT ) which is a
division of Department of revenue under Ministry of Finance .
Ø Corporate Tax
A ‘company has been defined as a juristic person
having an independent and separate legal entity from its shareholders . Income
of the company is computed and assessed separately in the hands of the company
. However the income of the company which is distributed to its shareholders as
dividend is assessed in their individual hands .Such distribution of income is
not treated as expenditure in the hands of company , the income so distributed
is an appropriation of the profits of the company .
Ø Income Tax
Income tax in
India is levied by the Central government and is monitored and controlled by
Central Board Of Direct Taxes under
ministry of Finance in allay with the provisions of the Income Tax Act . Income earned in a given financial
year is subject to tax as per the rates prescribed for that year . A financial
calendar is from April 1 to March 31 of
the following year . India has adopted the residential form of tax system . It
means tax payers will be divided into residents or non resident s . A tax payer
can also be classified as ordinary residents .
Ø Wealth Tax
The wealth taxation in
India is known as the wealth tax act , 1957.It applies to all the citizens of
the country . It is o ne of the most important direct taxes . It is paid on the
property ownership benefits . Till a person retains the ownership of a property
, he or she has to pay wealth tax based on the prevailing market rate . Even if
the property is not yielding any income , Wealth tax would have to be paid .
Ø Indirect tax
Charge levied by the State on consumption ,
expenditure , privilege ,or right but not on income or property , Customs
duties levied on imports ,excise duties on production , sales tax or value
added tax (VAT) at some stage in production –distribution process , are
examples of indirect taxes because they are not levied directly on the income
of the consumer or earner . Since they are less obvious than income tax (
because they don’t show up on the wage slip )politicians are tempted to
increase them to generate more state
revenue . Also called consumption taxes
, they are regressive measures because
they are not based on the ability to pay principle .
Ø Custom Duties
Customs duty on goods imported or exported from
India are levied according to the Tariff Act 1975 . To monitor imports and
exports , the Central government has the authority to inform the ports and
airports for the unloading of the imported goods and loading of the exported
goods , the location for clearance of goods imported or exported , the routes
by which above goods may pass by Land or inland water into or out of Indian
ports .
Ø Excise Duty
Central excise duty is an indirect tax which is
charged on such goods that are manufactured in India and are meant for domestic
consumption . The taxable fact
is “ manufacture “ and the liability of central
excise duty arises as soon as the goods are manufactured . The tax is on
manufacturing , it is paid by a manufacturer, which is then passed on to the
customer . The term “ excisable goods “ means the goods which are specified in
the First Schedule and the Second Schedule to the Central excise Tariff Act
1985 .
Ø Sales Tax
Sales Tax in
India is a form of tax that is imposed by the government on the sale or
purchase of a particular commodity within the country . Sales Tax is imposed
under both , Central Government ( Central Sales Tax ) and State Government (
Sales Tax) Legislation . Generally , each state follows its own sales tax act
and levies tax at various rates . Apart
from sales tax , certain states also imposes additional charges like works
contracts tax , turnover tax and purchaser tax , Thus , sales tax acts , as a
major revenue –generator for the various State Governments .
Ø Service Tax
Dr . Manmohan Singh , the then Union Finance
Minister , in his Budget speech for the year 1994-95 introduced the new concept
of Service Tax , Service Tax has been introduced in order to explore new
avenues for taxation and to bring more
people into the tax net.
Ø Value Added Tax
VAT is the indirect tax on the consumption of the
goods , paid by its original producers upon the change in goods or upon the
transfer of the goods to its ultimate consumers . It is based on the value of
the goods , added by the transferor . It is the tax in relation to the
difference of the value added by the transferor and not just a profit . VAT
can also be
referred to as a multi point destination based system of taxation , such that
tax is charged at every step of transaction in the supply chain .
VAT
was introduced in Indian Taxation System from April 1 , 2005 .The sales tax division of
department of revenue is responsible for
levying VAT.
VAT
can be3 collected in two different methods . In method one , tax is charged
both on the basis of the tax which is paid on purchase and the tax that is
payable on the sale (shown separately in the invoice ). Finally the difference
between the tax paid on purchase and the tax paid on sale according to the
invoice is VAT. In the other method tax is collected and charged on the
cumulative value of the tax paid on sale and purchase , by applying the rate of
tax applicable to the goods . It means the difference between the sale price
and purchase price is VAT.
Ø Special Additional Tax ( SAT )
SAT refers to the Special Additional Tax . It may
either be independent of VAT or In
addition to VAT . It may be levied at the first stage or at any stage as may be
notified in the state . The SAT will be levied on the sale of prescribed goods
such as liquor , petrol , aviation turbine fuel , diesel , raw opium , tendoo
leaves , natural gas .
The
rate on SAT would be levied as prescribed in respect of the relevant schedules
or notifications . SAT will be payable
along with the ordinary sales tax that is payable under the Act . This is done
by furnishing returns within the prescribed time and in the stipulated form .
Ø Gift Tax
The Gift tax in India is regulated by Gift Tax Act
that was constituted on April 1, 1958 .
It came into effect in nearly all parts of the country except Jammu and Kashmir
.As per this Act 1958 , all gifts exceeding Rs , 25000, in the form of cash
draft , check or others , received from one who does not have blood relations
with the recipient , were taxable .
However
from October 1, 2009 , individuals receiving shares or jewellery , valuable
artifacts , valuable drawings , paintings or sculptures or even property valued
over Rs 50000 , as gifts from non – relativ es , shall have to start paying
tax.
Ø Advance Tax
In some cases , the assessee is required to make a
payment of advance tax / Such taxes paid in advance are called prepaid
taxes .
Ø Modified VAT (Modvat)
Modvat stands
for Modified Value Added Tax “ . It is a scheme for allowing relief to final
manufacturers on the excise duty borne by their suppliers in respect of goods
manufactured by them ..
The
scheme was first introduced with effect from 1 March , 1986. Under this scheme
, a manufacturer can take credit of excise duty paid on raw materials and
components used by him in his manufacture . Accordingly , every intermediate
manufacturer can take credit for the excise element on raw materials and
components used by him in his manufacture .
Ø Minimum Alternative Tax ( MAT )
Normally , a company is liable to pay tax on the
income computed in accordance with the provisions of the income tax Act, but
the profit and loss account of the company is prepared as per provisions of the
Companies Act.
There
were large number of companies who had book profits as per their profit and
loss account but were not paying any tax because income computed as per
provisions of the income tax act was either nil or negative or insignificant .
In
such case , although the companies were showing book profits and declaring
dividends to the shareholders . They were not paying any Income tax .These companies are popularly
known as Zero Tax companies .
A
new tax credit scheme is introduced by which MAT paid can be carried forward
for set –off against regular tax payable during the subsequent five year period
subject to certain conditions .
Ø Goods and Services Tax (GST )
Goods and Services Tax (GST ) is a part of the proposed tax reforms that
center round evolving an efficient and harmonized consumption tax system in the
country . In 1954 , GST was introduced for
the first time in France . Today
this tax has spread across 140 countries .
In
India presently , there are parallel systems of indirect taxation at the
central and state levels . Each of the systems needs to be reformed to eventually
harmonize them .
In the Union Budget for the year 2006-2007 , Finance
Minister proposed that India should move towards national level Goods and
Services Tax that should be shared between the Centre and the States . He
proposed to set April 1 , 2010 . as the date for introducing GST . Word over ,
goods and services attract the same rate of tax . That is the foundation of a
GST . The first step towards introducing GST
is to progressively converge the service tax rate and the CENVAT rate .
The goods and service tax ( GST) is proposed to be a comprehensive indirect
tax levy on manufacture , sale and consumption of goods as well as services at
a national level .Integration of goods and services taxation would give India a
word class tax system and improve tax collections . It would end the long
standing distortions of differential treatments of manufacturing and service sector .
The introduction of goods and services tax will lead to the abolition of taxes such
as octroi , Central sales tax , State level sales tax , entry tax , stamp duty
, telecom licence fees , turnover tax , tax on consumption of sale of
electricity , taxes on transportation of goods and services ,and eliminate the
cascading effects of multiple layers of taxation . GST will facilitate seamless
credit across the entire supply chain and across all states under a common tax
base .
GST model is outlined with a dual GST consisting of
a Central and a State GST. To relieve the pressure on states , an assistance of
Rs 1,000 crore will be provided t o them for GST implementation
The predicted rate for the proposed GST is going to
be 20 percent . Petroleum products and liquor are however likely to stay behind
the GST structure . Liquor and tobacco
could be included in GST . States could impose an additional tax on these
products .
Ø Cess
The term cess ( a shortened form of assess ; the
spelling is due to a mistaken connection with census ) generally means a tax .
It is a term formerly more particularly applied to local taxation , and was the
official term used in Ireland when it was part of the United Kingdom of Great
Britain and Ireland ; otherwise , it has been superseded by “rate,” In colonial
India it was applied , with the qualifying word prefix , to any taxation , such
as irrigation – cess, educational – cess , and the like , Collectively referred
to as cesses in government censuses e.g.
“ Land revenue and cesses “
Ø Capital Gain
An income that is derived from the sale of an
investment is known as Capital gain , Capital
investment can be in the form of home , a farm , a ranch , a family
business , or a work of art . When any kind of property is purchased at a lower
price and then sold at a higher price , the seller makes a gain . Then this
sale of a capital asset is known as capital gain . This type of gain is a one – time gain and not a regular income
such as salary or house rent . Hence we can say
that capital gain is not recurring .
Ø Tax Deducted at Source ( TDS )
Assessee pays tax in the assessment year on income
earned in previous year . Due to this rule the tax collection is delayed till
the completion of the previous year .
Even sometimes people conceal their income and the tax is not paid at all in
order to overcome these problems , government
started to deduct some amount of tax from the amount which is receivable
by the assessee . The amount of tax so deducted is called as “ Tax
Deducted At Source “ or TDS in India
.
Ø Tax collection at Source ( TCS )
Tax Collection at Source or TCS , as the name
implies means collection of tax at source by the seller or collector . from the buyer of the goods .
As prescribed under Income Tax Act 1961
, it is mandatory on the part of the buyer to pay a predetermine3d value of TCS
to the seller , while purchasing a particular commodity . TCS is generally set
for business or trade in alcoholic liquor
, forest produce , scarp , etc .
