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Types Of Taxes In India Direct And Indirect Tax Pdf

types of taxes in india direct and indirect tax pdf

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Taxation in India

This revenue is generated through two types of taxes — direct and indirect taxes. While almost everyone is aware of direct taxes in India that are levied by the government such as income tax is a form of direct tax, most are unsure about the latter. Indirect tax can be defined as a type of tax where the incidence and impact of taxation does not fall on the same entity. It is collected by the government from an intermediary such as a retailer or a manufacturer. The eventual tax amount is paid by the buyer of the goods and services.

To put it simply, indirect taxes are those taxes that can be shifted from one individual to another. It is not levied directly on the income of the taxpayer, but is levied on the expenses incurred by them.

Some examples of indirect taxes include sales tax, entertainment tax, excise duty, etc. There are 7 main types of indirect taxes in India.

However, after the implementation of GST , these taxes are streamlined into one singular tax to reduce hassles of compliance. Not industry-friendly: By charging raw materials and goods, indirect taxes increase the cost of production and impairs the competitive capacity of industries.

This in turn discourages industries to expand. Want to know your taxes? Access our easy to use tax calculator , and plan your finances. What is indirect tax? Types of indirect taxes in India There are 7 main types of indirect taxes in India. Service Tax: A tax levied on the services provided by an entity and paid by the recipient of the services. Service tax falls under the ambit of the Central Government, meaning the central government it is collected by and deposited with the central government.

Excise duty: Tax levied on the goods produced or manufactured in India. It is a tax on manufacturing which is paid by the manufacturer, who in turn recovers the amount from his customers. Goods sold directly to the customers are levied VAT, which is exacted by the respective state governments on intra-state sales, as well as Central Sales Tax, which is collected by the Central Government on inter-state sales.

Custom Duty: A tax levied on the goods which are imported into India. In some cases, it is also applicable on the goods being transported out of India. Stamp Duty: A tax levied on the transfer of immovable property located in the state. It is charged by the State Government and varies in rates. It is also applicable on all legal documents. Entertainment tax: Charged only by the respective state governments, this tax is levied on all financial transactions related to entertainment.

Examples include video games, movie shows, amusement parks, arcades, sports activities, etc. Advantages Indirect taxes have a number of benefits and advantages. Some of them are: The poor can contribute: The less economically stable population of the country are often exempted from most direct taxes.

However, with indirect taxes, the government can reach the poor sections of the society as well. Equitable: Indirect taxes are also levied on the upper rungs of society through taxes on goods and services consumed by only the rich. Luxury tax is another example of equitable taxation. Convenient: Indirect tax is usually charged in small amounts and is paid only while making purchases. It is also included in the final price of a good or service.

Collection of indirect tax happens automatically when goods are sold and purchased. Broad-based: Indirect taxes are spread out evenly on a wide range of goods and services. This way the taxpayer is not burdened by a heavy direct taxation which might impact their economic and social life.

Disadvantages The flip side of the coin, these are the disadvantages of indirect taxes: Regressive: Since there are multiple forms of indirect taxes, some of them may bridge the gap between the rich and the poor, there are others which directly target subsistence goods.

For example, the salt tax is applicable for everybody equally. Thus implying the rich and the poor have to pay the same amount. However, the impact of this penalty will be higher on the poor than the rich Raises prices unduly: The process of indirect taxes is sometimes cumulative.

On a point-based transaction system, every middlemen tends to charge their own service tax, resulting in the price of the commodity to increase. TAGS: financial planning tax savings. Know More. Calculate Premium. Appreciate the Woman in your Life. Date of Birth. Email ID.

direct tax and indirect tax pdf

This revenue is generated through two types of taxes — direct and indirect taxes. While almost everyone is aware of direct taxes in India that are levied by the government such as income tax is a form of direct tax, most are unsure about the latter. Indirect tax can be defined as a type of tax where the incidence and impact of taxation does not fall on the same entity. It is collected by the government from an intermediary such as a retailer or a manufacturer. The eventual tax amount is paid by the buyer of the goods and services.

types of taxes in india direct and indirect tax pdf

Direct and Indirect Taxes in India

To help students understand that a tax levied on one person or group may ultimately be paid by others. Taxes can be either direct or indirect. A direct tax is one that the taxpayer pays directly to the government. These taxes cannot be shifted to any other person or group.

GST is a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services at the national level. Note: Given is an indicative list of items, for details Click Here. Tax incidence of a company depends on the residential status of the company,i.

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Taxation in India

A direct tax is one that the taxpayer pays directly to the government. The bottom line is that direct and indirect taxes are defined by keeping in mind the individual who pays the tax. The rates differ as announced for each tax slab for the financial year.

Classes of taxes

Updated on Jan 05, - PM. Tax is a mandatory fee imposed upon individuals or corporations by the Central and the State Government to help build the economy of a country by meeting various public expenses. Taxes are broadly divided into two categories- Direct and Indirect taxes. It is a tax levied directly on a taxpayer who pays it to the Government and cannot pass it on to someone else. Some of the important direct taxes imposed in India are mentioned below:.

Jump to navigation. Have you ever wondered why India is always leading ahead of other countries in terms of growth? However, we do not see any progress on ground zero. Currently India's GDP gross domestic product growth rate to 7.

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1 Comments

  1. Erlbusrepan

    06.12.2020 at 21:18
    Reply

    In the literature of public finance , taxes have been classified in various ways according to who pays for them, who bears the ultimate burden of them, the extent to which the burden can be shifted, and various other criteria.

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