Taxation system in India – FAQ

What are the types of taxes in India?

There
are two types of taxation in India – Direct tax and indirect tax.

Direct tax

Direct
tax is the tax where tax is directly collected from taxpayers; it means it is
tax on income. Income tax and wealth tax are the two direct taxes in India.

Income Tax

According to Income Tax Act 1961, every person, whose total
income exceeds the maximum exemption limit, shall be chargeable to the income
tax at the rate or rates prescribed in the Finance Act. Such income tax shall
be paid on the total income of the previous year in the relevant assessment
year.

Where a person includes:

•          Individual
•          Hindu
  Undivided Family (HUF)
•          Association
  of persons (AOP)
•          Body of
  individuals (BOI)
•          Company
•          Firm
•          A local
  authority and,
•          Every
  artificial judicial person not falling within any of the preceding categories.

Is income tax charging frequency in India?

Income tax is an annual tax imposed separately for
each assessment year (also called the tax year). Assessment year commences from
1^st April and ends on the next 31^st March.

Who levied the Income tax in India?

Income tax is levied by Central Government and is
administered by Central Board of Direct taxes (CBDT) under Ministry of Finance
in accordance with the provisions of the Income Tax Act.

What is the personal Income tax rate in India?

There
is slab rate system for calculation of income tax in India. There is different
tax rate for resident individual, resident
senior citizen and resident super senior citizen in India and shown below

Income Tax Rate of Individual is as below: (Applicable for financial year 2013-2014)

A.      For
resident individual (male or female); who is not senior citizen and HUF, AOP,
BOI and AJP:

In addition to income tax and
surcharge, the education cess of 2% and secondary and higher education cess of
1% of income tax and surcharge is also applicable.

B.      For
resident senior citizen who is 60 years or more but less than 80 years during
the financial year:

In addition to income tax and
surcharge, the education cess of 2% and secondary and higher education cess of
1% of income tax and surcharge is also applicable.

C.      For
resident senior citizen who is 80 years or more during the financial year:

In addition to income tax and
surcharge, the education cess of 2% and secondary and higher education cess of
1% of income tax and surcharge is also applicable.

When Wealth tax is applicable?

Wealth Tax is applicable on Individual,
HUF and a company if the net wealth of such person exceeds Rs. 30 Lakh. Wealth
tax is charged @ 1% on net wealth exceeding Rs. 30 Lakh. 

Which are the Indirect taxes in India?

There
are number of different taxes in India. Some taxes are collected by central
government, some taxes are collected by state government and some taxes are
collected by local authority.

Which indirect taxes are collected by central
government?

Excise,
custom and service tax these are the three taxes which are collected by central
government in India.

Who excise duty is charge and rate of taxes?

Central Excise duty is levied on those goods which are
manufactured in India. The taxable event is ‘manufacture’ and the liability of
central excise duty arises as soon as the goods are manufactured. It is a tax
on manufacturing, which is paid by a manufacturer. Central excise duty is
charges as per The Central
Excise Tariff Act, 1985.

Excise
duty is charge at the time of removal of goods form factory.  Excise duty
becomes payable irrespective of whether the removal is for sale or for some
other purpose.

Is there Custom Duty in India?

The Indian Custom Act was introduced that allow the
Central Government to collect the taxes under the name of Custom Duty

Custom Duties are usually levied with ad valorem rates and
their base is determined by the domestic value ‘the imported goods calculated at the official exchange
rate. Similarly, export duties are imposed on export values
expressed in domestic currency.

Is there a tax on services?

Yes.
Service tax is also applicable for services provided in India at the rate of
12.36%. The service tax is applicable for all types of services except those
services mentioned in the negative list.

How value added tax is chargeable in India?

Value
Added Tax (VAT) is the charged by state government in India. In each and every
sate there is different VAT act and different rate as per that schedule of VAT
of each state. If goods are sold in the state then local VAT rate of that state
is applicable. If goods are sold in different state then Central Sales Tax
(CST) will applicable.

 Is there any
other taxes?

There are
different taxes of state governments like entertainment tax, luxury tax,
professional tax, etc. Local bodies, like Municipal Corporation is also charge
the octori or local body tax (LBT) in addition to other taxes.

What is Status of Goods and Service Tax (GST) in
India?

Finance Minister Introduced the
Constitution Amendment Bill on Goods and Services Tax (GST) in parliament in
December 2014. If bill pass then GST may applicable from 1^St April
2016. After application of GST, tax system in India will becomes easy and all other indirect
taxes including excise, VAT, service tax, etc, will be abolished.