As we know, The cost of running an entire country, especially one that is as large and populated as India, is humongous. It is through the taxes we pay that the government can perform all operations. In other words, without taxes, it would be impossible for the government to run the country. Therefore, In this article, we will know all about Direct and Indirect Taxes in India.
Know all about Direct Tax in India
The direct tax in India is the tax a taxpayer pays to the government directly without the involvement of any third person.
There are several types of Direct Taxes in India. Let’s look at the most common ones.
Income Tax
Income tax is the major direct tax in India. Tax on revenue or Income tax is mandatory for every taxpayer in India as per a person’s age and income. The Government of India establishes a variety of tax slabs to determine the income tax payable. Taxpayers must submit ITR Filing (Income Tax Return) annually. Furthermore, ITR Filing allows people to obtain a refund. In case people do not submit ITR, they have to face enormous penalties.
Wealth Tax
Wealth tax is a direct tax aiming at reducing wealth inequality. For instance, an individual owning a property attracts a wealth tax and does not depend on whether the property creates an income. It is mandatory for an individual, a Hindu Undivided Family(HUF), or a company to pay a wealth tax of 1% on earnings of over Rs.30 lakh per year.
Corporate Tax
The individual with its shareholders having a separate and independent legal entity is a company. That’s why, The revenue produced by a corporation is computed and evaluated independently from its shareholders’ pay-outs.
As a consequence, it is compulsory for domestic and foreign firms to pay corporation tax. It is separate from shareholders’ income tax. The corporation tax is generally in the form of the sale of assets, fees for technical services, dividends, royalties, etc.
Comparison between Direct and Indirect Taxes
On the other hand, we have an Indirect Tax in India. Indirect Tax in India is a tax payable on products and services to the Government, not on an individual’s income, profit, or income. Furthermore, it is transferable from one taxpayer to the other. In other words, Indirect Tax means that the responsibility of paying taxes is with the end-user as they are purchasing the items.
In the past, the indirect tax was in the form of Excise duty, customs duty, and Value-Added Tax (VAT), etc. However, the current indirect tax in India is GST(Goods and Services Tax).
Current Indirect Tax in India – GST Summarized
The Goods and Services Tax (GST) is a type of Indirect tax. The government imposes GST on the supply of goods and services. The GST tax imposed is a blend of the CGST and the SGST, which are the central GST and the State GST, respectively.
The primary goal of this tax structure is to manage the cascading effects of other indirect taxes. For instance, The GST on Transport eliminates other indirect taxes, including service tax, excise duty, VAT, etc.
Know about Benefits of Direct and Indirect Taxes in India
- The Indian Government has introduced flat tax slabs depending on the income and age of the individual. Furthermore, the exemptions are also present so that any income discrepancies get balancing.
- These exemptions are available for taxpayers doing ITR filing. Besides, Direct taxes help in fighting inflation.
- GST allows you to reduce the amount payable to your purchases when paying the final product tax. You get this facility through the Input Tax Credit after getting GST Registration.
- With its excellent technical assistance, GST return filing is fully online. It enables companies to ensure transparency, integrity. Furthermore, data is properly in digital form with complete security.
If you want any other guidance related to ITR Filing or GST Return filing, please feel free to talk to our business advisors at 8881-069-069.
Download E-Startup Mobile App and Never miss the freshest updates narrating to your business.