Taxation in India - A Complete Notes
Important Bullet Points:
- A tax which is paid by the person on whom the tax is incident is called a - Direct tax.
- An advalorem duty is a tax on the basis of – the price of a commodity.
- Temporary tax levied to obtain additional revenue is called – surcharge.
- A tax levied at the same time at all levels of the base is called – Proportional tax.
- Finance Ministry formulates – fiscal ministry.
- Income tax act – 1961.
- After 1991, the Central Government implemented various far-reaching reforms in the area of taxation. This was based on the recommendations of the – Rajah Chelliah Committee.
- A tax that away a higher proportion of one’s income as the income as the income rises is termed as – Progressive tax.
- The Indian income tax is – 1.Direct and 2. Progressive tax.
- Excise Duties are taxes on – production of commodities.
- The minimum effect of Direct Taxes is on – incomes.
- National income of India is complied by – Central Statistical Organisation.
- Service tax is an – Indirect tax levied by the Central Government.
- In India, the tax proceeds of excise duty as a percentage of gross tax revenue has significantly declined in the last five years.
- No of slaves in VAT – 4.
- In India, the service tax was first introduced in – 1994.
Canon or Rule of Taxation:
There are four Canons of Taxation.
- Canon of equity: Every person should pay dependent upon to ability to pay.
- Canon of Certainty: The tax payer knows – 3 things. a). How much to pay, b). When to pay, c). In what form to pay.
- Canon of Convenience: Should be convenient to the tax payer.
- Canon of Economy: Cost of Tax Administrative should be less than Tax collected.
Basis for Determine Tax System in India:
Taxation in India dependent on Two factors:-
- Residential States and
- Weather the income is Indian or foreign Income.
a). Residential States are three types 1. Resident and ordinarily Resident in India (ROR). 2. Resident but not ordinarily resident in India (RNOR), 3. Not Resident.
How to collect tax in India:
Tax structure in India:
Direct Tax: Point of Payment & Point of Incidence are same.
There are five type of direct tax:
1). Corporate Tax – (example: Reliance, Tata Motor, ACC Cement etc, all Indian Company)
2). Income Tax.
3). Wealth Tax > 15 lakh.
4). Minimum Alternate Tax.
5). Freenge Benefit Tax.
Indirect Tax: Point of payments and Point of Incident are different and we do not understand when we pay it.
There are six type of Indirect tax in India:
1). Excise Tax
2). Service Tax
3). Sales Tax
4). Customs Tax
5). VAT (Value Added Tax)
6). GST (Goods and Service Tax)
Heads of Income in India:
1). Income from Salary
2). Income from Business or profession.
3). Income from house property.
4). Income from Capital gain.
5). Income from other sources.
- Minimum alternate tax: this tax is payable when Taxable profit is less than book profit.
- Freenge Benefit Tax: Additional Income Tax payable on benefits provided by a company to its employees.
- Wealth Tax: This is a tax on benefits derived due to ownership. This is related to given things are Jewellery, Urban Land, Auto Mobile, Aircraft, Arts and Cash.
- Sales Tax: It is divided in two types 1. Central Sales Tax: like Sales between two different states in India, example- Bombay and Kolkata. 2. State Tax: Production sales in only its own area of this state.
- Excise Tax: Collected only Central Government. Only alcohol manufacturing tax collected by state.
Feature of Value Added Tax (VAT):
- It is a multi-point destination-based system of taxation.
- It is a tax levied on value addition at each stage of transaction in the production-distribution chain.
- VAT is a tax on the final consumption of goods or services and must ultimately be borne by the consumer.
Component of Fiscal Policy:
- Taxation policy.
- Public debt policy.
- Public expenditure policy.