The central government imposes many taxes, but they can be divided into two broad categories - Direct Tax and Indirect Tax.
Direct tax
This is the tax that business, companies , firms and partnerships and we all pay from our income or wealth. It is called direct tax because the person who pays the tax has to also bear the burden of the tax.
Corporation (corporate) tax: It is the tax that India Inc pays on its profits. It is the single biggest source of tax for govt.
Taxes on income other than corporation tax: It's income-tax paid by 'non-corporate assesses' such as individuals and Hindu undivided family (HUF).
Securities transaction tax (STT): STT is the small tax you need to pay on the total amount you pay or receive when you buy or sell shares on stock exchanges or transact in mutual funds. This is in the nature of a transaction tax.
Wealth tax: This is the tax individuals pay on their accumulated wealth. It is levied on individuals, HUFs and companies at the rate of 1% on the amount by which the net wealth exceeds Rs 30 lakh.
Capital gains tax: It is the tax levied on profit or gain made on sale of a capital asset such as shares, house, commercial property. Long-term capital gains tax is levied at 10% & short term at the marginal income-tax rate of an assesse.
Dividend distribution tax (DDT): Dividends are tax free in the hands of investors but the entity distributing dividends to investors pays DDT to govt.
Minimum alternate tax (MAT): It is often the case that companies report profits but pay no tax. Such cos have to pay a certain minimum tax on their book profits.
Withholding tax: This is a small tax deducted whenever a payment is made that is like an income for the receiver such as dividends, interest, royalty or even capital gains.
Indirect tax
It's essentially a tax on our expenditure, and includes customs, excise and service tax. It is called indirect tax because the tax is paid to the government by the person selling the good or providing service but its final burden is on the consumer. It is considered a 'regressive' tax as the burden is equal whether you're rich or poor.
Customs: Anything purchased from another country and brought into India is subject to this tax. It serves a twin purpose, yielding revenues for the government and protecting Indian industry.
Union excise duty: This is a duty imposed on goods manufactured in the country.
Service tax: It is a tax on services rendered.
GST: A proposed single tax that will replace the plethora of indirect taxes. This will make tax administration effective, compliance easy and evasion difficult. Consumers will benefit from the decline in the incidence of tax.
KUSHANK SINGHAL
PDDM 2ND
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