Taxes in India

India’s tax collection structure is well divided and the central government, state governments and local agencies are responsible for it. Union governments collect income tax, central excise and service tax, while state governments levy land income taxes, VAT, stamp duty, etc. Local authorities are responsible for the water tax, allocation and many other taxes.

There are three broad classifications of taxes, namely ad valorem and specific taxes, indirect and direct taxes, and progressive and regressive taxes. An ad valorem tax means that the tax is imposed on the basis of the total value of the merchandise, while the specific tax is the tax on the basis of weight, quantities, size, width and breadth.

Direct tax is imposed on someone and its burden is not transferred to another and is borne by the person himself, for example, income tax, corporate tax. Indirect taxes are imposed on someone, but whose burden may be shifted to someone else, for example, excise taxes, sales tax, and customs duties.

A progressive tax is a tax whereby as income increases, the tax rate will increase so that those who earn more income end up paying more. A proportional tax is a tax under which, whatever the level of income, the tax rate remains the same, so that the differences between the highest and lowest incomes are the same before taxes as after taxes.

Every citizen should follow proper tax planning practices. This means that he must pay his taxes, as well as make a suitable investment and select the correct tax saving instruments. The tax to be paid is deducted on the income obtained and the type of investment made. There are many tax exemptions on investment, which is made on the basis of the source of income. Investors must have proper tax planning to take advantage of these benefits.

Income tax can be calculated with the help of income tax calculator. Calculates taxable income by combining income based on salary, allowances and incentives, capital gains, and other sources of income. For the fiscal year 2007-08, income up to Rs 1,10,000 per annum is exempt from such tax. For income above this amount, there are multiple slabs. Additional 10 per cent charge applies if income exceeds Rs 8,50,000. Along with this charge is added the 2 percent education fee.

In India, the amount of indirect taxes was very high compared to direct taxes. In 1991, before the tax reform, only 19 percent of taxes came from direct taxes while the percentage was 81 percent from indirect taxes.

The fact that indirect taxes are predominant over direct taxes in a country suggests that the tax burden falls more on the poor because indirect taxes are taxes on goods.

But after the tax reform based on the recommendation of the Chelliah and Kelkar committee, many of these features have been addressed to make the tax structure simple, comprehensive, reduce the multiplicity of taxes, reduce the complexity of taxes, and even block the evasion