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In this chapter we shall learn about the Direct taxes in India and types of direct tax and its importance.
Direct taxes are taxes that are paid directly to the government by an individual/organisation. It is imposed directly and cannot be transferred to any other entity for payment.
It is one of the two main sources of government revenue. The other is the indirect tax. Direct taxes constitute around 50% of the government’s revenue share every fiscal year. India's direct tax collection for FY 20 stood at \(Rs.10.27\ lakh\ crore.\)
\( \)
Who is responsible for collecting direct tax in India ?
The Central Board of Direct Taxes (CBDT) is a statutory authority that manages direct taxation in India. CBDT was established after the enactment of Central Board of Revenue Act, 1963. CBDT is responsible for the administration of the direct tax laws in India and is a part of the Department of Revenue under the Union Finance Ministry.
The Central Board of Direct Taxes (CBDT) is a statutory authority that manages direct taxation in India. CBDT was established after the enactment of Central Board of Revenue Act, 1963. CBDT is responsible for the administration of the direct tax laws in India and is a part of the Department of Revenue under the Union Finance Ministry.
Types of Direct taxes,
- Income tax
- Gift Tax
- Corporation Tax
- Estate Duty
- Wealth Tax
- Capital gains tax
Income Tax:
Depending on the individual’s monthly income and age, the income tax is imposed. The government decides the various tax slabs, which determine the amount of income tax that needs to be paid by the individual person.
Depending on the individual’s monthly income and age, the income tax is imposed. The government decides the various tax slabs, which determine the amount of income tax that needs to be paid by the individual person.
Corporation Tax
Domestic companies, will have to pay corporate tax. Foreign companies who make profits in India must also pay this tax. Corporation tax is levied on the profits of the companies. Income earned by selling assets, technical services, royalties or interest that is based in India are also taxable.
Domestic companies, will have to pay corporate tax. Foreign companies who make profits in India must also pay this tax. Corporation tax is levied on the profits of the companies. Income earned by selling assets, technical services, royalties or interest that is based in India are also taxable.
Wealth Tax
This is imposed on property of individuals depending upon the worth of property. This reduces income inequalities within the country. This tax was abolished in the year 2016.
This is imposed on property of individuals depending upon the worth of property. This reduces income inequalities within the country. This tax was abolished in the year 2016.
Gift tax
It is to charge tax on gifts from the recipients, it is paid to the Government. It was abolished in 1998.
It is to charge tax on gifts from the recipients, it is paid to the Government. It was abolished in 1998.
Estate duty
It is levied to the successor of the inherited property. This tax was abolished in the year 1985.
It is levied to the successor of the inherited property. This tax was abolished in the year 1985.
Capital gains tax
It is imposed on the profits that is earned from the sale of assets or investments. Investments in bonds, shares, businesses, art and home are capital assets.
It is imposed on the profits that is earned from the sale of assets or investments. Investments in bonds, shares, businesses, art and home are capital assets.
Advantages of Direct tax
- The Indian government achieves economic and social balance by creating tax slabs based on individual's incomes and age.
- To ensure equality, individuals and organizations with higher profits should pay higher taxes to the government so that it can aid the poor people in the society.
This explains the definition of Direct tax and its types. Paying tax is every citizen's moral duty.
Recent development:
Vivad Se Vishwas Scheme is the direct tax scheme announced in the budget 2020 for settling tax disputes between individual person and the IT department.
Vivad Se Vishwas Scheme is the direct tax scheme announced in the budget 2020 for settling tax disputes between individual person and the IT department.
In this lesson we have learned about the definition of Direct tax and types of Direct taxes and its advantages.
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