A tax is a mandatory financial burden or any other sort of levy imposed upon a person by a government agency so as to finance various public needs and government spending. Evasion of or refusal to pay tax, and even disobedience of or attempts to evade tax, is legally punishable by the government. For most people, paying taxes is usually a part of their everyday life; not without personal feeling but also because the need for such necessities may arise at any point of time.
But what exactly is that burden we are talking about? Taxation refers to the taking away of a person’s actual money – the money that is taken out of the person’s own income by the government in the form of taxes. That taking away includes salaries, interest, profits, rent, inheritances, gifts and some other items of value. The amount of money that the government takes out of your pay check depends on your income and how much you earn.
The rate of income tax, commonly known as the income tax, is charged on all taxable income of an individual. In India, like many other countries, the tax system is based primarily on the principle of indirect taxation. Indirect taxation means any activity that reduces the taxable income of an individual and leaves him with only the direct monetary burden, be it income tax or any other type of tax. An indirect tax burden is therefore imposed on the earning potential of the individual and a portion of that burden is transferred to the government through the practice of taxation. A number of practices and decisions have led to the emergence of various indirect practices and they include:
Excise Duties or custom fees are the price paid by a seller to the government for the right to retail goods. These are basically the indirect taxes levied on the sale of goods. The price of the goods that has been paid for by the seller will not be added to the price list of the products henceforward. This price is called the excise duty or custom fee.
Income Tax or commonly called as income tax is the main source of revenue for the government. It is calculated as the amount of money that an individual or entity earns after deducting certain standard deductions. These include the self-employment tax, dividends, interest and many other types of taxes. The amount of income tax that an individual or entity earns is dependent on the gst that he pays and the amount of work he does. The standard deduction will vary from individual to individual.
Income Tax Brackets For individuals who are not covered by any social security scheme, the concept of income tax bracket helps in determining the tax payable. All those who fall in the high-income earners bracket are liable to paying high-income tax rates. All those who fall in the medium-income band are liable to pay relatively low tax rates. And for the lower-income group all those who earn less than a certain amount are liable to pay relatively lower tax rates.