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PFPrimers Tax

10taxesyoushouldknowabout
Throughthisarticle,wewilltrytofigureoutdifferenttypesoftaxesleviedinIndianfinancialsystem
andtheireffects
InvestmentYogi|Hyderabad
April11,2014LastUpdatedat08:49IST

52

11

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Taxes,alongwithtaxationrulesareoneofthemost
complexandconfusingtopicsofanyfinancialsystem.
Thiscomplexityarisesbecauseofdifferenttypesoftaxes
withdifferenttaxratesandcontinuousamendmentsinthe
taxationruleswhichareretrospectiveandprospectiveat
times.Throughthisarticle,wewilltrytofigureoutdifferent
typesoftaxesleviedinIndianfinancialsystemandtheir
effects.

ALSOREAD
Odishamonthlycommercialtax
collectionsinks10%inNov

TypesofTaxes

Taxesrepresenttheamountofmoneywepaytothe

6importantaspectstohelpyou
duringtaxplanningforFY14

Governmentatpredefinedratesandperiodicity.Taxesare

FinMinofficialssaybringing
overseasdealundertaxnet
createsuncertainty

whichitprovidesvariouskindsofservicestothetax

thebasicsourceofrevenuetotheGovernmentusing
payers.TherearemainlytwotypesofTaxes,directtax

Ourconfusingtaxcode

andindirecttaxwhicharegovernedbytwodifferent

OdishaCommercialtax
collectionup14%inApril

boards,CentralBoardofDirectTaxes(CBDT)and

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Letsdiscussthetwotypesoftaxesindetail.

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DirectTaxes

Directtaxesarethepersonalliabilityoftaxpayer.These
arecollecteddirectlyfromthetaxpayersandtheyhaveto
bepaidbythepersonsonwhomitisimposed.Important
directtaxesarelistedbelow:
IncomeTax
Thisismostimportanttypeofdirecttaxandalmosteveryoneisfamiliarwithit.TDSisitsfamous
synonymandwhosoeverisearningaboveaminimumamount(taxexemptionlimit)hastopay
incometax.

WealthTax
ThisisinadditiontotheincometaxandisleviedifyournetwealthexceedsRs30Lakhattherate
of1%ontheamountexceedingRs30Lakh.
*NoteInBudget20132014FinanceMinisterMrP.Chidambaramintroducedasurchargeof10
percentontaxpayerswithanannualtaxableincomeofmorethan1crore(10million)rupees.

PropertyTax/CapitalGainsTax
Thisisleviedonthecapitalgainsarrivedbysellingpropertyandstocks.Taxratesaredifferentfor
longtermandshorttermcapitalgains.

GiftTax/InheritanceorEstateTax
AmountexceedingRs.50000receivedwithoutconsiderationbyanindividual/HUFfromany
personissubjectedtogifttaxasincomeunderothersources.Thereareexemptionslikemoney
receivedfromrelativesisnottaxable.Marriagegiftsandmoneyreceivedthroughinheritanceare
alsoexemptfromgifttax.Inheritancetaxwasearlierinpracticebuthasbeenrepealedbythe
government.

CorporateTax
CompaniesoperatinginIndiaaretaxedasperthecorporatetaxrateontheirincome.Thistaxis
oneofthemajorsourcesofrevenueforgovernment.


IndirectTax

ImpactandincidenceofindirectTaxesfallondifferentpersonsasopposedtodirecttaxeswhere
impactandincidenceisonthesameperson.Thesetaxesarerecoveredfromdifferentgroupsof
peoplebuttheliabilityremainswiththepersonwhocollectsit.Taxpayerrecoverstheindirect
taxespaidfromtheirconsumersandclientsandfinallypaysittogovernment.
Forexample,whenwepurchaseanyproductwepayVAT,whenweeatinrestaurantswepay
servicetaxwhichareultimatelydepositedingovernmentskittybytheserviceproviders.Brief
aboutvarioustypesofindirecttaxesisgivenbelow:
ServiceTax
ServiceprovidersinIndiaaresubjecttoservicetax,whichischargedontheaggregateamount
receivedbytheserviceprovider.Serviceslikeleasing,internet/voice,transport,etcaresubjectto
servicetax.

CustomDuty
Customdutiesareindirecttaxeswhichareleviedongoodsimportedto/exportedfromIndia.There
aredifferentrulesfordifferenttypesofgoodsandsectors.Governmentkeepsonchangingthese
ratessoastopromoteimport/exportofspecificgoods.

ExciseDuty
ExcisedutiesareindirecttaxeswhichareleviedongoodsmanufacturedinIndiafordomestic
consumption.Likecustomduty,thereareanumberofruleswhichkeeponchangingasper
governmentdiscretion.
SalesTaxandVAT
SalestaxisleviedbythegovernmentonsaleandpurchaseofproductsinIndianmarket.As
customers,whateveryoubuyfromthemarket,youpaysalestaxonit.Now,salestaxis
supplementedwithnewValueAddedTaxsoastomakeituniformacrosscountry.
SecurityTransactionTax(STT)
STTisleviedontransactions(sale/purchase)donethroughthestockexchanges.STTis
applicableonpurchaseorsaleofvariousfinancialproductslikestocks,derivatives,mutualfunds
etc.

FindingInformation
Ihaveintentionallynotpresenteddetailsofvarioustaxratesandtaxslabsastheykeepon
changingatregularfrequency.Fordetailsregardingcorrectratesandslabsitsrecommendedto
visitgovernmentsincometaxwebsite.

Source:investmentyogi.com

READMOREON
INCOMETAX

PERSONALFINANCE
VAT

EXCISEDUTY

TAX

TAXPLANNING

CAPITALGAINSTAX

PREVIOUSSTORY

Lowercosts,bevigilantof
riskyassets,SebitellsAMCs

SALESTAX

PROPERTYTAX

PF

NEXTSTORY

Phonefraudsgaintraction

RECOMMENDEDFORYOU
WhatisGSTand
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Eventhosewith
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