The mandatory and obligatory contribution made by individuals or corporations to the country under the tax laws and directorates is, to the Government of India, called taxes. From state, municipal to national, taxes are applicable on all strata in India and are considered to be one of the biggest sources of revenue of income for the Government which is in turn used for the development of the nation and its people.
The government levies taxes on the citizens of the country to generate revenue for developmental projects, to enhance the country’s economy and usher in progress, and lift the standard of living of the citizens. The government’s authority to tax the citizens of India is powered from the Constitution of India that gives the central and state governments the supreme power to levy taxes. All the taxes that are there within the country must be backed by a beam lighting law passed by the State Legislature or the Parliament.
The income tax in India that the government collects from the citizens of a country is used for national development. Thus, it is essential and important for every taxpayer to pay the applicable taxes every year. Understanding the different types of ITR and income taxes in detail to avoid confusion and make sure that taxes are correctly and paid on time. Non-payment could result in severe penalties and prosecution by law as taxes are an important part of national progress and societal development.
There are mainly two different types of taxes, direct taxes and indirect taxes. The implementation of both taxes is different and separate from one another. Some of them are paid directly, for example income tax, corporate tax, wealth tax, etc., while some are paid indirectly, like sales tax, service tax, value added tax, etc.
As mentioned, these taxes are paid directly. The government through the IT department levies these taxes directly on an individual, a company or any financial institution, it cannot be transferred or fulfilled by or to any other person or institution.
The institution that deals with the direct taxes is the Central Board of Direct Taxes (CBDT) under the Department of Revenue. The CBDT assists with its laws and regulations and is the backup of several acts that govern over several facets of the direct taxes. These taxes are paid by both residential and non-residential Indians.
Indirect taxes are those that are levied on goods and services. They are quite different from direct taxes because they are not levied on an individual who has to pay them directly to the government, as an alternative.
The indirect taxes are imposed on the products and the individual who is providing the product, collects them. The most common examples of indirect taxes are Sales Tax, Taxes levied on imported goods, Value Added Tax (VAT), etc. Such taxes are levied by merging them with the price of the product or service which in most cases accelerates the price of the product.
There are many types of indirect taxes:
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