Taxation is the major instrument in the hand of the modern Governments to raise finance to meet expenditure done on various public services. It is a compulsory obligation on the people and the payment of which is the legal duty of the citizens. It may be on their property, income and even it may be required to pay at the time of manufacturing and selling or purchasing a commodity. Tax constitute the major source of the government’s income
Meaning of Tax
The tax is compulsory payment to the Government by taxpayer without any expectation of some specified return. While paying tax, the tax-payer is not entitled to force the government to give something in return of the sum he has paid as tax.
Characteristics of a Tax
A compulsory payment: - Tax is not an optional payment by a citizen but a payment having legal enforcement behind it. Tax is levied by the government which is not subject to denial.
Taxes are paid by the Person and organization: - Taxes are paid by the person though they may be imposed on income or goods.
Payment for the common welfare: - Tax is not a payment for the tax-payer but for all. Everyone receive the benefits provided by the government through expenditure.
Tax adversely affects the monetary condition of tax payer: - A tax being an additional payment reduces the wealth and purchasing power of the tax payer.
Various types of taxes: - The term includes not a single type of imposition by the Government. In modern time so many types are levied on different activities of public. Income tax, Wealth tax, Excise duty, Customs, Expenditure tax, Sales tax, Service tax, Property tax, Entertainment tax, Land revenue are examples of some important taxes levied by different governments.
Aims of Taxation
Raising Public Revenue: - The first and foremost aim of taxes is to raise Public Revenue to meet the ever-increasing public expenditure.
Reduction in the Inequality of Wealth: - One of the aims of the taxation comes to be redistribution of wealth and income in such a way so as to ensure more equitable distribution. This is possible by taxing rich people heavily and to confer benefit on the poor.
The Aim of Tax Collection is for Public good: - It is for the benefit of the general public and for the maximum welfare of the whole society that the taxes are imposed and collected.
Restriction on production and use of harmful goods: - Taxes on intoxicant tobacco etc. raise public revenue on less than other taxes but their main aim is to prevent the determination of health of general public.
Regulation of import and export: - Import taxes are levied in order to restrict imports of those goods which may harm the “infant” industries producing those goods in the country. Similarly luxury goods may be taxed heavily while being imported so as to divert the national funds in some other forms of production inside the country.
In the same way export taxes may be levied for the purpose of restricting export of those goods which are required within the country and their export may hamper national production or consumption. Thus an important objective of taxation is to regulate the economy in accordance with the needs of the country.
Salient Features of Indian Tax System
India tax system possesses the following characteristic features
Three Tire Tax System- India is a federal Republic. There are three levels of government – (a) Central Government (b) State Governments and (c) Local bodies. In the Indian constitutions sources of public revenue have been divided between central and State Governments clearly. India tax structure is divided in three parts-
Tax imposed by the Central Government
Tax imposed by the State Government
Tax imposed by the Local Government
Various Types of Taxes- The Government of India, State Governments and Local bodies (Municipal Corporation, municipality, Gram, Panchayats etc.) impose various types of taxes on production, selling,...
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