What is Tax?

A word Tax came from Latin word Taxo. A Tax is an obligatory fee or monetary charges charged by a government on an individual or an organisation to raise funds for public works. Tax amount is used to fund different public expenditure programmes. Failure in tax payment invites punishment under the pre-defined law.

    Types of Taxes

    Taxes in India can be characterised as Direct Taxes and Indirect Taxes. Direct tax and indirect tax also sub divided in other categories. 

    Direct Tax -

    Direct tax is a tax which you directly pay to government on your income. Direct taxes are regulated by the Central Board of Direct Taxes (CBDT). Direct taxes are the taxes those cannot be transferred to any other individual or legal entity.

    Direct Tax also divided in sub categories those are

    1. Income Tax:

    Income tax is the tax that is imposed on the annual income or the profits which is directly paid to the government. Everyone who earns is liable to pay income tax. The tax exemption limit is Rs.2.5 lakh per annum for individuals below 60 years of age. The tax exemption limit is Rs.3 lakh for individuals between the age of 60 and 80 and the tax exemption limit is Rs.5 lakh for individuals above the age of 80. For different income amounts there are different tax slabs.

    2. Capital Gains Tax:

    Capital gains tax is charged on the sale of a property or money received over an investment. It may be from either short-term or long-term capital gains from an investment. 

    3. Securities Transaction Tax:

    STT is imposed on securities and stock market trading. STT is charged on the price of the shares and securities traded on the Stock exchange.

    4. Perquisites Tax:

    Perquisites taxes are charged on the different benefits and bonuses that are provided by a company to its employees.

    5.Corporate Tax:

    Corporate taxes are paid by the companies. It is based on the different revenue slabs. Corporate taxes are divided in sub-categories those are.

    • Dividend Distribution Tax: Dividend distribution tax is charged on the dividends that companies pay to the investors. It applies to the net or gross returns that an investor receives from the investment.
    • Fringe Benefit Tax: Fringe benefit tax charged on the fringe benefits provided by the company to its employees. This include accommodation, transportation, entertainment, leave allowance, travel allowance, employee welfare, Employee Stock Ownership Plan (ESOP), etc.
    • Minimum Alternative Tax (MAT): Minimum Alternative Tax is charged by the IT Department to the companies which are governed by Section 115JA of the IT Act. Some Companies are exempted from MAT those are in the power and infrastructure sectors.

    Indirect Tax -

    Indirect tax is a tax that is collected by somebody else on your behalf and pays to the government eg. Restaurants, Theatres and E-Commerce stores recover taxes from you on goods and services you purchased.  These taxes added to the price of the products and services. Currently only one indirect tax is imposed by the government which is GST.

    GST – GST is a consumption tax that is charged on the supply of goods and services in India. GST is refunded to the parties those are involved in the production process (not the final consumer).

    GST eliminated other kinds of taxes and charges like Value Added Tax (VAT), Central Value Added Tax (CENVAT), customs duty as well as excise taxes. Some products and services are not taxed under GST like electricity, alcoholic drinks, and petroleum products. These are taxed as per the previous tax system by the individual state governments.

    Other Taxes –

    Other taxes are small cess taxes those are minor revenue generator. Various types of other taxes are as follows

    Property Tax: Property Tax is also called Real Estate Tax or Municipal Tax. Residential and commercial property owners pay property tax. This tax money is used for the maintenance of the fundamental civil services. Property tax is imposed by the municipal corporations based in each city.

    Professional Tax This is an employment tax that is imposed on those who practice a profession or earn a salary like lawyers, chartered accountants, doctors, etc. Professional tax differs from state to state.

    Entertainment Tax: Entertainment tax is imposed on television series, movies and exhibitions, etc. The tax is charged on the gross collection from the earnings. 

    Registration Fees, Stamp Duty and Transfer Tax: These taxes are collected with property tax at the time of purchasing a property.

    Education Cess: Education Cess is imposed to fund the educational programs launched and maintained by the Indian government.

    Entry Tax: Entry Tax is imposed on the products or goods that enter a state, especially through e-commerce institutions.

    Road Tax and Toll tax: Road and Toll tax is used for the maintenance of roads and toll infrastructure.

    Benefits Of Taxes:

    The purpose of taxes is to provide funds to the government for spending without inflation. Taxes are used by the government for various purposes, like Funding of public infrastructure, Development and welfare projects, Defence expenditure, Scientific research, Public insurance, Salaries of state and Government employees, Operation of the government, Public transportation, Unemployment benefits, Pension schemes, Law enforcement, Public health, Public education, Public utilities such as water, energy, and waste management systems etc.

    Paying taxes help in Loan approvals, Visa application, Government tenders and claiming tax refunds..

    Penalty for Not Paying Taxes:

    The government charge penalties on any individual or legal entity who avoids taxes. The penalty is dependent on the category of the tax.

    Who Can File Income Tax Returns-

    Individual having income from capital gain like mutual funds, stocks etc., Salaried individuals and individuals having foreign income.

    Requirements to File ITR –

    You should have required documents for file ITR like PAN card, Adhaar Card, Bank Account Details, Investment details and form 16.

    How to File ITR-

    Now a days you can file ITR through Online through various online tax service providers, you can also visit any CA (charted account) office for file ITR returns.