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Taxes in India

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There are two types of taxes in India.

  • Direct Taxes
  • Indirect Taxes

Direct Taxes: These taxes are levied directly on an entity or an individual and cannot be transferred onto anyone else. Direct taxes, which are imposed by the Government of India, are:

  • Income Tax : Income tax, this tax is mostly known to everyone. Every individual whose total income exceeds taxable limit has to pay income tax based on prevailing rates applicable time to time.
  • Capital Gains Tax:This is a tax that is payable whenever you receive a sizable amount of money. It could be from an investment or from the sale of a property. It is usually of two types, short term capital gains from investments held for less than 36 months and long term capital gains from investments held for longer than 36 months.
  • Securities Transaction Tax:This tax is added to the price of security during the transaction itself, hence you cannot avoid (save) it. As this tax amount is very low people do not notice it much.
  • Perquisite Tax:Perquisites are all the perks or privileges that employers may extend to employees. These privileges may include a house provided by the company or a car for your use, given to you by the company. These perks are not just limited to big compensation like cars and houses, they can even include things like compensation for fuel or phone bills.
  • Corporate Tax:Corporate Taxes are annual taxes payable on the income of a corporate operating in India. For the purpose of taxation companies in India are broadly classified into domestic companies and foreign companies.

InDirect Taxes: By definition, indirect taxes are those taxes that are levied on goods or services. They differ from direct taxes because they are not levied on a person who pays them directly to the government, they are instead levied on products and are collected by an intermediary, the person selling the product. InDirect taxes, which are imposed by the Government of India, are:

  • Sales Tax :Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by Union Government, while sales tax on intra-State sale (sale within State) (now termed as VAT) is charged by State Government.
  • Service Tax:Like sales tax is added to the price of goods sold in India, so is service tax added to services provided in India. In the reading of the budget 2015, it was announced that the service tax will be raised from 12.36% to 14%. It is not applicable on goods but on companies that provide services and is collected every month or once every quarter based on how the services are provided.
  • Value Added Tax:Tax imposed by Central government on sale of goods is called as Sales tax same is called as Value added tax by state government.VAT is additional to the price of goods and passed on to us as buyer (end user).
  • Custom duty & Octroi (On Goods):When you purchase anything that needs to be imported from another country, a charge is applied on it and that is the customs duty. It applies to all the products that come in via land, sea or air. Even if you bring in products bought in another country to India, a customs duty can be levied on it.
  • Excise Duty: An excise or excise duty is a type of tax charged on goods produced within the country. This is opposite to custom duty which is charged on bringing goods from outside of country.
  • Anti Dumping Duty: Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade.

Other Taxes :

  • Professional Tax: Professional Tax, or employment tax, is another form of tax levied only by state governments in India. According to professional tax norms, individuals earning income or practicing a profession such as a doctor, lawyer, chartered accountant, or company secretary etc. are required to pay this tax.
  • Dividend distribution Tax: Dividend distribution tax is the tax imposed by the Indian Government on companies according to the dividend paid to a company’s investors. Dividend amount to investor is tax free.
  • Municipal Tax: Also known as Property Tax or Real Estate Tax, this is one of the taxes levied by local municipal bodies of every city. These taxes are levied in order to provide and maintain the for basic civic services.
  • Entertainment Tax: Tax is also applicable on Entertainment; this tax is imposed by state government on every financial transaction that is related to entertainment such as movie tickets, major commercial shows exhibition, broadcasting service, DTH service and cable service.
  • Stamp Duty, Registration Fees, Transfer Tax: Stamp duty, registration fees, and transfer taxes are collect as a supplement of property tax.
  • Education Cess , Surcharge: Education cess is deducted and used for Education of poor people in INDIA. All taxes in India are subject to an education cess, which is 3% of the total tax payable.
  • Gift Tax: When an individual receives a gift from another person. It is considered to be a part of their income generated through “other sources” and the relevant tax is levied.
  • Wealth Tax: Wealth Tax was another tax levied by the government, which was charged based on the net wealth of the assessee. Wealth tax is chargeable with respect to the net wealth of a property.
  • Toll Tax: At some of places you need to pay tax in order to use infrastructure (road, bridge etc.) build from your money given to government as Tax. This tax is called as toll tax.
  • Swachh Bharat Cess: This is a cess imposed by the government of India and was started from 15 November 2015. This tax is applicable on all taxable services and the cess currently stands at 0.5%. Swachh Bharat cess is levied over and above the 14% service tax that is prevalent in the present times.
  • Krishi Kalyan Cess: This cess is introduced in order to extend welfare to the farmers. The effective rate of Krishi Kalyan Cess is 0.5%. This tax will be imposed on all taxable services.
  • Dividend Tax: 10% additional tax imposed on dividend income above 10 Lac is called Dividend Tax.
  • Infrastructure Cess: This cess is another tax brought into effect from the 1st of June 2016. Under this tax, a cess of 1% is applicable on petrol/LPG/CNG-driven motor vehicles which are 4 meters or less in length and 1200cc or less in engine capacity.
  • Entry Tax: All items entering in the state boundaries ordered via E-commerce are under this tax boundary.