What All You Need To Know About Taxation In India
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Taxation is a mandatory legal obligation or any kind of levy charged on a citizen by a governmental agency in order to finance various public expenses and government spending. A person may be charged with taxation either through personal income tax or through income taxes of inheritance tax. Evasion of or refusal to pay tax, and punishment for the evasion or refusal to pay is also punishable by law. It is important to collect all tax liabilities promptly since a tax lien will stay on your credit history report for up to 10 years. In short, you may find it difficult to secure financing in the future if you have not paid your tax dues.
The major types of taxes are progressive, regressive, and proportional. Progressive tax systems are meant to ensure that poor citizens pay less while the rich pay more in return for their accumulated wealth. A regressive tax system is in effect when tax rates are progressively added on the income of the taxpayers. The progressive tax system is often associated with a flat tax rate which is the amount of tax that accumulates from one dollar to the next. A proportional tax system, on the other hand, assigns tax levels based on how much money a person makes.
In India, the progressive taxation system is combined with indirect taxes like sales tax, property tax, income tax and service tax. These indirect taxes, however, do not come directly out of the person’s salary and wages but rather as a deduction taken in the income tax return. A good example of indirect tax in India is the goods and services tax which is implemented in different states of India by the central government and collects a similar amount of tax from all residents of the country. The central government typically levies the same amount of indirect taxes in all states of India. The state governments also levy indirect taxes for the same purposes as the central government.
One kind of indirect tax in India is the sales tax which is basically a tax on the price of items purchased by a non-residential Indian citizen. This tax, however, does not apply to items that are imported into the country. This is one type of indirect tax that has been implemented to ensure that the local businessmen do not take advantage of the consumers of the national market. Though sales tax is collected by most states of India, the central government does impose a special sales tax in certain states of the country. The purpose of the central sales tax is to discourage interstate trade. Some states have attempted to abolish the tax completely but such efforts have failed.
A regressive taxation system is also a form of indirect taxation in India. This means that it is based on earnings and not on possession of tangible assets. This form of indirect taxation is most commonly applied to farmers in India, fishermen, non-govt employees and people who earn over a specified limit. The incomes that are taxable and those that are not are both computed by taking the amount of income and then subtracting the exemptions and other miscellaneous deductions that the user may have benefited from.
In certain states of the country, property taxes have been imposed. Property taxes are a percentage of the value of any real or personal property that is owned by any individual resident of India. The percentage of property tax varies from state to state and is levied at different rates. Another kind of indirect taxation in India is service tax which is basically a tax on the performance of a service. Service tax can be levied on goods, services or even a combination of goods and services.
