The purpose of writing this post is to provide detail information about the varied type of taxes in India. So that, common pepole to tax payer could understand what is tax, why we need to pay tax and how many types of taxes levied in India.
What is Tax?
In general, tax is the imposition of financial charges upon an individual or a company by the Central Government or State Government or similar other fuctional equivalents in state. We can also say that taexa represent the amount of money we pay to Government at predefined rates and periodicity and taxes are the basic source of revenue to the Government.
Why Do We Need to Pay Tax?
All we citizen need smooth roads, industries, schools, colleges, better hospitals, motors, stadiums, power plants, electricity, airports, powerful army and more. As every citizen expect it from the Government but how Government will do that? Government need money to maintain and develop all these things and they receive this money via taxes we pay. So don’t be selfish pay your taxes and help India to grow because taxes you paid get benefited sometimes directly sometimes indirectly.
How many types of Taxes in India?
I am sure you have understand what is tax and why we need to pay taxes? Now the questions is how many types of Taxes in India. In general, mainly two types of taxes are popular Direct Tax and Indirect Tax which are governed by 2 different boards, Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC).
As I said in the beginning of the post that here we are going to discuss in detail about the varied type of taxes in India. There are 20 types of taxes in India which we have split it in 3 category namely Direct Tax, Indirect Tax and Other Tax.
Direct Taxes are directly imposed and paid to Government of India. According to a survey, the rise of direct tax collection in India is increased over a period of the past years. It’s great signal for the nation as it shows that Indian citizen becoming more responsible and want to contribute in growth of India. Direct Taxes which are imposed by the Government of India, are:
1) Income Tax
Almost every citizen is very familiar with income tax. In simple way income tax is paid by the individual whose total income exceeds taxable limit based on prevailing rates applicable time to time.
Check Income Tax Slabs for Male, Female and Senior Citizens here. Income Tax Slabs for FY 2014-2015
2) Property Tax/Capital Gains Tax
As the name indicate tax on capital gain, If you sale property, shares, bonds or any precious material etc. and earn profit on it within predefined time frame then you need to pay capital gain tax. Tax rates are different for long term and short term capital gains.
3) Wealth Tax
An addition to the income tax and it is levied if your net wealth exceeds Rs. 30 Lakh at the rate of 1% on the amount exceeding Rs 30 Lakh.
4) Securities Transaction Tax (STT)
Securities Transaction Tax or STT is levied on sale/purchase done throught the stock exchanges. Either you sale or purchase products like stocks, derivatives, mutual funds etc its applicable on both. The price of this tax is added of security during the transaction itself, hence one can’t avoid (save) it. As the amount of this tax is very low people don’t notice it much.
5) Corporate Tax
One of the major sources of revenue for government. Corporate Taxes are annual taxes payable on the income of a corporate operating in India.
6) Perquisite Tax
Perquisite may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer.
Indirect taxes are recovered from different groups of people but the liability remains with the person who collects it. The person, business or organization who pay tax collects it from their consumers and clients and finally pay it to government. Indirect tax could be understand easily with this examples:
Whenever we purchase any products from the general store, shops we pay VAT like soap, colgate, blade or any other products instead when we eat in restaurants we pay service tax and these taxes finally reached to government. So with the above example we can understand that we pay tax to government in Indirect way as well. Further various types of indirect taxes are mentioned below:
7) Service Tax
Most of the service is used by us it paid which is called service tax. Services like leasing, internet, transport, telephone, tour operator, interior decorator, advertising, architect, health center, banking and financial service, beauty parlor, event management, consultancy service etc are subject to service tax.
8) Sales Tax
Sales 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. Sales can be broadly classified in 3 categories (i) Inter-State Sale (ii) Sale during import / export (iii) Intra-State (i.e. within the State) sale. State Government can impose sales tax only on sale within the State.
9) Value Added Tax (VAT)
Value Added Tax (VAT) is additional to the price of goods and passed on buyer. Around 220+ items are covered with VAT. VAT rates vary based on nature of item and state.
10) Custom duty & Octroi (On Goods)
Whatever goods imported from a foreign country to India, One has to pay custom duty at the port of entry like the airport. Custom duty is different based on nature of items.
Octoroi is similar to custom duty but its related to municipality or any other jurisdiction for use.
11) Excise Duty
Some time people got confused in Excise duty and Custom duty both are totally different already shared about custom duty above.
Excise duty is type of tax charged on goods produced / manufactuer within the country. Excise Duty is also known as CENVAT (Central Value Added Tax).
12) 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. Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade.
13) Entertainment Tax
Entertainment Tax is imposed by the state government on every financial transication such as movie tickets, major commercial shows, exhibition, broadcasting service, DTH Service and cable service etc.
14) Municipal Tax
Municipal Corporation in every city imposed tax in terms of property tax.
15) 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. The education cess is mainly applicable on Income tax, excise duty and service tax.
16) Gift Tax
If you receive any gift from someone it is clubbed with your income and you need to pay tax on it. This tax is applicable if gift amount is more than 50,000 Rs in a year.
As you have seen that KBC winners won several amount all they have to pay tax on their winning amount.
17) Stamp Duty, Registration Fees, Transfer Tax
If you purchase any land, plot or property than you have to pay stamp duty, registration fee and transfer tax instead the cost paid to seller. It is required for preparing the legal document of property in your favor.
18) Dividend Distribution Tax
Dividend distribution tax is imposed by the Indian Government on companies according to the dividend paid to a company’s investors. Dividend amount to investor is tax free.
19) Professional Tax
Professional tax is paid by every employee working in Private organizations. The tax is deducted by the Employer every month and remitted to the Municipal Corporation and it is mandatory like income tax.
20) Toll Tax
At some of the places you need to pay tax in order to use infrastructure (road, bridge etc.) this kind of tax is called Toll Tax.
If I have missed any tax then don’t forget to share it below in comment box. I will be happy to receive your responses if you like this post then don’t forget to share and like us on social networking sites.