Tax Structure in India

Topics: Tax, Taxation, Value added tax Pages: 10 (2950 words) Published: August 15, 2010
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. The Tax Structure in India is quite strong and follows the financial year. The taxation under the tax structure in India is applicable for any kind of income pertaining to a person working as an employee under the public sector units, private sector units, foreign companies in India, Departments of the State Governments of India, and Departments of the Central Government of India or self-employed individuals engaged in commercial activities which is legal in nature. The several corporations engaged in commercial activities also come under the taxation. The public bodies, state governments and central government have clear demarcation of their functioning. The central government imposes tax on all kinds of income such as central excise, customs duties, and service tax apart from income pertaining to agriculture. The State Governments of India is responsible for imposing tax pertaining to Value Added Tax (VAT), sales tax, income from agriculture, state excise duty, stamp duty, professional tax, land revenue, etc. Taxes imposed by the local bodies are pertaining to octroi tax, water supply utilities, drainage and sewage utilities, property tax, etc. In last 10-15 years, Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India. Since April 01, 2005, most of the State Governments in India have replaced sales tax with VAT. Different taxes levied under tax structure in India:

Direct Taxes
* Personal Income Tax
* Tax on Corporate Income
* Tax Incentives
* Capital Gains Tax
* Wealth Tax
Indirect Taxes
* Securities Transaction Tax
* Service Tax
* Excise Duty
* Customs Duty
Taxes Levied by State Governments and Local Bodies
* Other Taxes
* Sales Tax or Value Added Tax

The different heads of income for tax structure in India:
* Salary
* House property
* Profit in business or profession
* Capital gains
* Other sources
The different exemption schemes under the tax structure in India: * Exemption on income spent on higher educational purpose * Exemption on income spent for the treatment of a diseased person who is dependent * Exemption on income spent as contribution to provident fund, insurance policies, etc. * Exemption on the income spent on buying national savings certificates and investments in other government based savings schemes * Exemption on the income of a disabled person

* Exemption on the income spent on the payment of interest on loan The important facts under the tax structure in India:
* The laws on central government income tax collection and recovery is governed by the Department of Tax and Revenue under Ministry of Finance, India * The system of taxation is completely based on the personal assessment of income * Penalties and interest are charged on the non-payment of taxes and failure to file returns * The filing date is not extended and any late filing is charged with interest * The returns pertaining to the losses have to be filed within the due date * All the large sized and medium sized taxpayers are subjugated to investigative assessment * Designated due dates are ascertained for the purpose of filing of returns * The tax is deducted at source by the employers on behalf of the employees and from all kinds of defrayments to non-residents

* Income Tax
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