Taxation In India

Taxation is one of the most important sources of income for the government.  It can be referred to as an act of levying taxes. A tax is actually a compulsory cost or charge that is imposed by the government on people or organisations. The individuals who are taxed have to pay the taxes regardless of any similar return from the goods or assistance by the government. These taxes may be imposed on the income and wealth of either a person or an entire corporation and the rate of taxes may vary based on some factors.Keep in mind the following is written with respect to taxation in india

Taxes are broadly classified into two categories, first is the Direct Tax and next is the Indirect Tax. Let’s get to know more about both of them one at a time.

 

  1. Direct Tax

it is a tax paid by an individual on whom it is lawfully imposed. In a direct tax, the person who is paying and bearing the tax is one and the same. It can be considered as a tax on income and property.here the person has to personally file the tax and pay it Here are few examples of a direct tax:

Income Tax, Vehicle Tax, Expenditure Tax, property Tax, Interest Tax, Gift Tax and a lot of others.

A few benefits of direct tax:

  • as it is equitable it is imposed on one person based upon his/her salary or property.
  • You will be aware of time, procedure and amount of tax that has to be paid.
  • it is flexible and it changes based on the income as well as property.
  • usually, taxpayers feel the burden of taxes and so they can insist that the government, should spend their contributions for the welfare of the entire community.

Cons of the direct tax:

  • it can be annoying and a headache as it is deducted from your income or salary.
  • all the taxpayers feel the inconvenience as the government continues to impose tax amount progressively.
  • most of the people might try to avoid it to lessen their burden.
  • individual tax collections are even expensive for the government.

 

  1. Indirect Tax

It is basically a tax imposed on one person but can be partly or wholly paid by someone else. In indirect tax, the payer and bearer are two different individuals. It is considered to be a tax on consumption or the expenditures. Let’s list a few of the Examples of indirect taxes, they are VAT, Entertainment Tax, Excise Duty, Sales Tax, Hotel Tax, Import, And Export Duty and a few others.

Listed below are the benefits of indirect tax:

  • It is convenient you as a taxpayer do not have to pay a bulk amount for tax.
  • As it facilitates mass participation. Every single person receiving the goods or services has to pay it.
  • Very less chance of tax evasion.
  • If there is any consumption of harmful goods then the government can impose higher taxes.

a few negatives that you should know about indirect taxes:

  • It is uncertain and fluctuates with the demand.
  • The tax burden for the rich and poor is same which is frustrating.