Any Government, either central or state level needs funds to run the economy and to fulfill their requirements like construction of roads & airports, pay salary to government employees, run welfare schemes for the public etc. So collection of tax from the public and business is the major part of government revenue. In India taxation is a very crucial & politically influenced component due to our democratic policies. Here we have mentioned some important points about taxation in India:
Adjusting taxation is important component of fiscal policy of the government. There are mainly two types of taxes in India, Direct taxes which are collected directly from the public or business from their income and Indirect tax which collected from the end users of good & services.
Direct Taxes:
These are taxes levied directly on individuals or business entities, such as income tax, corporate tax, wealth tax, Capital Gain tax etc. A government body called central board of direct taxes handles the matters related to direct taxes in India.
Indirect Taxes:
These are taxes levied on goods and services used by end users or consumers and are collected by services providers to pay the government, such as GST (Goods and Services Tax), excise duty, customs duty, etc.
Types of Tax in India
Income Tax:
Income tax is a type of direct tax levied on the income of an individual and business. There are different tax rates in India for different individuals or entities depending on their income.
| Taxable Income | Old Tax Regime | New Tax Regime |
| Up to Rs. 2.5lakh | Exempted | Exempted |
| Above Rs. 2.5 lakh to Rs. 3 Lakh | 5% | Exempted |
| Above RS. 3 Lakh to Rs. 5 Lakh | 5% | 5% |
| Above Rs. 5 Lakh to Rs. 6 lakh | 20% | 5% |
| Above Rs. 6 lakh to Rs. 9 lakh | 20% | 10% |
| Above Rs. 9 Lakh to Rs. 10 lakh | 20% | 15% |
| Above RS. 10 Lakh to Rs. 12 Lakh | 30% | 15% |
| Above Rs. 12 Lakh to Rs. 15 Lakh | 30% | 20% |
| Above Rs. 15 Lakh | 30% | 30% |
Goods and Services Tax (GST):
GST is a new age taxation system in India launched by the NDA government in 2017. GST is an indirect tax levied on the supply of goods and services. GST is a replacement of various indirect taxes levied on different goods & services by central and state governments. There are 5 GST Slabs, 0%, 5%, 12%, 18% and 28%.
Corporate Tax:
Corporate Tax is a type of direct taxes levied on the income of business in India. The rates of corporate tax also differ for different categories of business.
Customs Duty:
It’s a type of direct tax levied on imported goods & services.
Wealth Tax:
Wealth tax was used to be levied on the wealth owned by individuals and HUFs above a certain threshold. It was abolished in 2015.
Capital Gain Tax:-
Capital gain tax is a direct tax levied on individual for capital appreciation of their assets.
Major Tax Administration In India;
- Central Board of Direct Taxes ( CBDT)- CBDT is a government body which regulates the direct taxes in India.
- Central Board of Indirect Taxes ( CBIC )- CBIC regulates the indirect taxes in India.
- Income Tax Department- Income Tax Department regulates the income tax affairs in India and monitor any fraud in income tax.
- GST Council- Good and services Tax ( GST ) Council regulates the GST collection and distribution of GST in central and state governments.
Tax Deductions and Exemptions: The Income Tax Act provides for various deductions and exemptions, such as deductions for investments in certain saving schemes, exemptions for agricultural income, etc.
Taxation in India is constantly evolving with reforms aimed at broadening the tax base, reducing tax evasion, and simplifying tax compliance for individuals and businesses.
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