Taxes

Taxes are the main source of revenue for the government. Taxes are the money that the people have to pay to the government to meet the expenses of public interest such as welfare and development activities. The person who pays taxes is the 'taxpayer'. Article 265 of the Constitution states that no tax shall be imposed or collected except in accordance with law. This means that all taxes should be imposed in accordance with law. Only the legislative bodies, such as Parliament and State Legislatures, have the power to make laws. Articles 265 to 289 of the Constitution related to taxation.  There are two types of taxes. Direct taxes and indirect taxes. 

Direct tax

If the person who is subject to the tax and the person who bears the financial burden of the tax is the same person, then such a tax is called a 'direct tax'. The special feature of direct tax is that the burden of the tax is borne by the taxpayer himself. Examples of direct taxes include land tax, building tax, employment tax, personal income tax, corporate tax, and gift tax.

1. Property tax

Property tax, which is a direct tax, is levied by local self-government bodies. Property tax is determined based on the floor area of ​​buildings. Property tax is a tax that has to be paid every year. Houses of ex-servicemen have been exempted from property tax. Khadi, weaving and yarn units have also been exempted from property tax.

2. Employment tax

An example of a direct tax is employment tax or professional tax. This tax is levied by local self-government bodies. The maximum employment tax that can be levied from an individual in a year in India is Rs. 2500. Employment tax is payable to the local self-government body where the establishment where an individual works is located. Employment tax can be levied on any person who is engaged in any profession, art or work within or outside the panchayat area of ​​every company that transacts business for a total of not less than 60 days in a six-month period, or who resides in the panchayat area and is engaged in any business or holds any public or private office. CRPF personnel, employed blind persons and differently-abled persons are exempted from employment tax.

3. Personal income tax

Personal income tax is a tax levied on the income of individuals. The Central Government collects 'Personal Income Tax' or 'Income Tax' under the Income Tax Act, 1961. The tax rate increases as the income of individuals increases. The tax is levied on the amount above a certain income limit.

PAN Card - PAN card number is a ten-digit number issued by the Income Tax Department in India. The full form of 'PAN' is 'Permanent Account Number'. PAN card is issued under the provisions of the 'Indian Income Tax Act' of 1961. PAN card is the most important document in filing income tax returns. It is also used as an important identification document.

4. Corporate Tax

Corporate tax is a tax levied on the net income or profits of companies. All profits earned by a company in domestic/foreign businesses are considered for corporate tax. The money received through corporate taxes is an important source of revenue for the country.

5. Paper taxes 

Revenue receipts are the income that is paid to the government without being able to claim anything back from the government. Therefore, they are called non-recoverable. The main component of revenue receipts is tax revenue. Direct taxes such as property tax, gratuity tax, and immovable property tax do not exist anymore. Since the income from these is not considered, they are called paper taxes or paper taxes.

Indirect tax

The special feature of 'indirect tax' is that the burden of tax imposed on one person is transferred to another. For example, the burden of sales tax initially falls on the trader. However, the trader passes on the tax burden along with the price to the consumer who buys the product. Then the price paid by the consumer includes the tax. This is the main special feature of indirect tax. GST was implemented in India by including a large section of the existing indirect taxes with the aim of simplifying the existing indirect tax system and implementing the principle of 'one tax in one country'. GST is an example of indirect tax. The indirect tax rate on items not included in GST remains the same as it is. Excise duty, customs duty, service tax, and value added tax are examples of other indirect taxes.

Taxes imposed by various governments

Some of the taxes levied by the Central, State and Local Governments are given below:

1. Central Government - Corporate Tax, Personal Income Tax, Central GST, Integrated GST

2. State Government - Land Tax, Stamp Duty, State GST

3. Local Government - Property Tax, Employment Tax

Increased proportional tax rates

One way to achieve the goal of income redistribution is through progressive income tax. According to this, the tax rate increases with the increase in income. Companies are taxed in a proportional manner. Here, the tax rate is a fixed proportion of their profits. In the case of excise duty, essential items of daily life are exempted from tax or a reduced rate is applied to them. Convenience goods and semi-luxury goods are taxed at a moderate rate. However, luxury goods, tobacco, petroleum products, etc. are taxed at a higher rate.

Budget and taxes

According to Article 112 of the Constitution, it is the constitutional duty of the government to prepare a statement of the income and expenditure of the government for each financial year and present it in the Parliament. The financial year is considered to be from 1 April to 31 March of the following year. The annual financial statement presented in the Parliament/Legislative Assembly is the most important of the budget documents. The budget has two accounts - the Revenue Account and the Capital Account. The Revenue Account is related to the current financial year. It is also called the Revenue Budget. The Capital Account, which is related to the assets and liabilities of the government, is also called the Capital Budget. The budget contains the main proposals related to taxation. A Finance Bill containing budget proposals regarding the imposition of taxes, tax abolition, tax reduction, tax amendment or adjustment is also presented along with the Annual Financial Statement.