All Indian Taxes

Finance » Taxes

Taxes in India are levied in India by the central government, state government and the local governing bodies like the Municipality and the Local Council. In a developing country like India, the government has to make fiscal policies to promote the economic growth and development of the country. In order to materialize these policies the government needs capital and for this taxes are levied from individuals and businesses. So it is very important that every citizen should pay tax to the government.

There are different types of taxes; they are as follows:

Direct Tax

  • Taxes in IndiaIncome Tax: This is one of the most common types of tax and most of you would be familiar with it. This tax is deducted directly from your income if your income exceeds the taxable limit.
  • Capital Gains Tax:This tax is levied if you sell your property, bonds, shares, jewelry, or anything that gives you profit. The profit can be calculated by deducting the total amount you get by selling your asset and the amount you paid for it. You have to pay tax on the profit.
  • Securities Transactions Tax: When you buy or sell a stock form the share market, you have to pay Securities Transaction Tax. This tax is imposed by the Government because the most of the people who earn their profits from the share market do not declare their assets. As a result, they can avoid paying capital gain tax, as the government can levy tax only on the profits they earn, if these are not declared. The Securities Transactions Tax or STT is levied on derivative instruments, equity shares, equity oriented mutual funds etc.
  • Perquisite Tax: Perquisite Tax (earlier Fringe Benefit Tax or FBT) is levied to employees for the non-monetary benefits given to them by their employers. For example, if your company gives you non-monetary benefits life a rented apartment, a car with a driver, you would have to pay tax for it. This tax was earlier borne by the employers.
  • Corporate Tax: These taxes are paid by the companies to the Government of India and it is levied on the income of the corporate. Apart form the corporate tax, they also have to pay other kinds of taxes.

Indirect Tax

  • Sales Tax: When you buy any commodity, you have to pay its cost price plus the sales tax. The manufacturer then pays the tax to the Government. In India this kind of tax is paid to both the state government (Sales Tax) and the central government (Central Sales Tax). The Sales Tax is levied only on the intra-sale of commodities (sale within one state). The Central Tax is levied for inter-state sales (sales within states). Apart from the Sales Tax, there may be additional tax that can be levied on the sale of a commodity.
  • Service Tax: When you avail services you have to pay tax on it and this is called Service Tax. This tax was introduced in 1994 and is now applicable on every type of services, except the negative list of services and is applicable in all the states, except Jammu and Kashmir. Some of the services for which you have to pay taxes include, advertising, beauty saloon, health care, financial services, etc.
  • Customs Duty and Octroi: This tax is levied on the goods imported into the country as well as the goods that are exported to any other foreign country. It is charged at the entry point of the country like airport, docks etc. The Octroi Tax is levied for goods that are transported from one municipality to another.
  • Excise Duty: The Excise Tax or the Central Value Added Tax (CEVAT) type of tax is levied on the goods that are produced within the country.
  • Anti Dumping Duty: When goods are exported from one country to another at a price that is lower than the actual price of that commodity, then the government charges anti-dumping duty tax on it.

Other Taxes

  • Professional Tax: If you are a working in a private organization, you have to pay this tax and it would be deducted by your employer from your salary. The rate of this tax may vary from one state to another.
  • Municipal Tax: You have to pay this tax to the municipal corporation if you own a property.
  • Entertainment Tax: When you buy tickets to watch a movie or a show, exhibition, you have to pay Entertainment Tax for it.
  • Stamp Duty, Registration: When you buy a property, you have to pay this tax in addition to the cost fixed by the seller, if you want to have the property transferred t your name.
  • Gift Tax: If you get gift that is more than Rs 50,000 in a year, you will have to pay gift tax for it.
  • Toll Tax: You have to pay this tax if you use the infrastructure like the roads, highways etc. to maintain them in the long run.

Some other kinds of taxes include education tax, dividend distribution tax and wealth tax. Various kinds of taxes have become an important part of development of a nation. These taxes help in the implementation of various economic policies to promote the growth of a country. So they help in providing economic stability and also tend to reduce unemployment rate in a country. Although people complain about paying taxes, a well planned taxation system is quite essential for a government.