TAX

Taxes in India

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Taxes are a government’s way allowing them to earn an income, which is then used for various projects so as to indulge a country to boost its economy and improve the people’s living standard.Taxes rates are influenced by the state, central and local governments. For example   municipalities are allowed to decide on smaller taxes to be levied within their own jurisdiction. It is however important to note that taxes imposed are required to be under the specified laws of a country.

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Taxes type

There are two distinct types, either indirect or direct taxes. The difference in how the two taxes are implanted is that some is simply paid using direct means for example the dreaded tax income, wealth tax and the corporate tax. While some others are paid using indirect means such as the value added tax, sales tax, service tax etc.

Direct taxes

As stated above these are taxes which are directly paid. They are directly levied on a certain entity or even an individual and therefore cannot be transferred to another person. One of the organizations that deal with direct taxis referred to as the central board of direct taxes [CBDT] which is found under the revenue department. It is also responsible for the different acts which govern the various direct tax concepts. These acts include

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  • Act of income tax
  • Wealth tax act
  • Gift tax act
  • Interest tax act
  • Expenditure tax act

There are various examples of direct taxes which include income taxes, capital gain taxes, security transition taxes, perquisite taxes, corporate taxes and wealth taxes. Each individual group has its own definition but they simply mean the same thing.

Indirect tax

These are taxes which are to be levied on services and goods offered to individuals. That’s when the difference comes in from the direct taxes. They are not imposed onto a person directly. However the tax is levied onto good and services purchased or used by an individual that why it is referred to as indirect taxation. The examples of these taxes include value added tax on commodities, sales tax, service tax, octrio and custom duty, excise duty.

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Benefits of taxes include

  • They encourage investments and savings since when a person decides to invest into something the taxable income amount reduces.
  • When paying the taxes you are mandated to fill in the tax returns and file it. There when applying for a loan such documents are necessary so as to prove some abides with the laws are required of them.

Penalties involved when you fail to pay your tax

Each type of the above mentioned tax has its own penalty. The penalties can range widely from a simple fine to an imprisonment sentence. It all depends with the severity of a crime.

It’s recommended that you pay the required taxes on time and properly fill in all the tax return documents. Properly fill them so as to avoid being on the wrong side of the law. It’s also important to note that all the taxes and the amount you are liable to pay.