TAX

TAX (INDIA)

Tax is a compulsory charge imposed by a public authority.

e.g. Central Government, State government, municipality, Gram Panchayat.

Tax can be classified into Direct and Indirect Taxes.

Direct Tax – cannot be passed on to someone else, payed by the person on whom it is legally imposed. E.g. Income tax

Indirect Tax – is passed on fully or partly to other people e.g. Excise duty

Two important features of Direct Tax:

They are progressive i.e. the rate of taxation rises with increase in income

They can be used to promote savings and induce people to invest in desirable assets.

e.g. Income tax – Every individual (Indian), company, firm, local authority, cooperative society, etc., has to pay income tax on total income computed according to the provisions of the income tax act 1961. Taxable income is the net income after deducting certain rebates from the total income. E.g. wealth tax, gift tax, capital gains tax, expenditure tax, cooperative tax.