Various Kinds Of Taxes
Posted on October 01 2020
Taxes, along with taxation rules are one of the most complicated and confusing topics for any financial system. The complication arises because of the various kinds of taxes with different tax rates and continuous changes in the taxation rules which are contemplative and prospective at times.
Types of Taxes
The amount of money paid by us as tax in predefined rates and periodically to the Government. Government’s basic sources of revenue are Taxes using which it provides various kinds of services to the tax payers. There are mainly two types of Taxes, direct tax and indirect tax which are governed by two different boards, Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC).
Let’s discuss the different types of taxes in detail.
Direct taxes are the personal liability of tax payer and are collected directly from the persons on whom it is imposed. Important direct taxes are listed below:
Income Tax is the most important type of direct tax and is familiar to everyone. TDS is its famous synonym and whoever is earning above a minimum amount (tax exemption limit) is eligible to pay income tax.
The wealth tax is in addition to the income tax which is collected if your net wealth increases Rs 30 Lakh at the rate of 1% on the amount increasing Rs 30 Lakh.
Property Tax/Capital Gains Tax
This is collected on the capital gains which is come in by selling the property and the stocks. Different tax rates are applied for long term and short term capital gains.
Gift Tax/ Inheritance or Estate Tax
If the amount crossing Rs. 50000 received without consideration by an individual/HUF from any person is administered to gift tax as income under “other sources”. There are exemptions like money received from relatives is not taxable. Marriage gifts and money received through inheritance are also exempt from gift tax. Inheritance tax was earlier in practice but has been repealed by the government.
This tax is one of the major sources of revenue for the government. It is taxed depending on the income as per the corporate tax rate for the operating companies in India. This tax is one of the major sources of revenue for government.
Impact and incidence of indirect Taxes fall on different persons as opposed to direct taxes where impact and incidence is on the same person. These taxes are recovered from different groups of people but the liability remains with the person who collects it. Tax payer recovers the indirect taxes paid from their consumers and clients and finally pays it to government.
For example, when we purchase any product we pay VAT, when we eat in restaurants we pay service tax which are ultimately deposited in government’s kitty by the service providers. Brief about various types of indirect taxes is given below:
Service providers in India are liable to service tax where is charged on the accumulated amount which is received by the service provider. Services like leasing, internet/voice, transport, etc are liable to service tax.
Custom duties are indirect taxes which are collected on goods which is imported to/exported from India. Different types of goods and sectors have different rules. Government on specific goods keeps changing the rates of import/export.
Excise duties are indirect taxes which are collected on the manufactured goods in India for domestic consumption. Like custom duty, there are a number of rules which keep on changing as per government discretion.
Sales Tax and VAT
Sales tax is collected by the government on sale and purchase of the products in the Indian market. As customers, whatever we buy from the market, we generally pay an amount of sales tax on it. Now, sales tax is enhanced with new Value Added Tax so as to make it uniform across country.
Security Transaction Tax (STT)
STT is collected on transactions of both sale/purchase are done through the stock exchanges. STT is applicable on the purchase or sale of various fiscal products like stocks, derivatives, mutual funds etc.
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