Concept of taxation:

The term ‘Taxation’ has been defined in many ways.

Commonly heard definition includes: It is the process by which the sovereign, through its
law-making body, races revenues use to defray expenses of government, it is a means of
government in increasing its revenue under the authority of the law, purposely used to
promote welfare and protection of its citizenry. It is the collection of the share of individual
and organizational income by a government under the authority of the law.
According to Hugh Dalton, “a tax is a compulsory contribution imposed by a public
authority, irrespective of the exact amount of service rendered to the taxpayer in return, and
not imposed as penalty for any legal offence.”
‘Taxation’ is the act of a taxing authority actually levying tax, Taxation as a term applies to all
types of taxes, from income to gift to estate taxes. It is usually referred to as an act; any
revenue collected is usually called taxes. ‘Taxation’ is the act of laying a tax, or of imposing
taxes, as on the subjects of a State, by government, or by the proper authority; the raising of
revenue.
The most important source of revenue of the government is taxes. The act of levying taxes is
called taxation. A tax is a compulsory charge or fees imposed by government on individuals
or corporations.
The persons who are taxed have to pay the taxes irrespective of any corresponding return
from the goods or services by the government. The taxes may be imposed on the income and
wealth of persons or corporations and the rate of taxes may vary.
There are two facets to taxation
 On one hand, it is a contribution made by the individual and business entities for the
economic growth and development. Also, it is a source of revenue for the government
to manage public expenditure.
 On the other hand, it is involuntary payments made by the individuals and business
entities to the government which decreases the former’s annual income or profit. Also,
there is no return on such contributions adding to their income or profit.
Hence, the normative standard for the taxation should be that the taxes should be levied in
such a manner that they do not pinch the taxpayer. Fairness, transparency, efficiency and
efficacy should be the prime feature of taxation system. It should balance both the
interests of the taxpayers as well as of the government.
Taxation, broadly speaking, touches following disciplines of study:
1. Law
2. Accountancy
3. Economics
4. In modern times, globalisation as under the international relationship between two or
more nations, tax rules also play major roles in shaping their relationships.
Nature and Scope of Taxation:
 Taxation is the inherent power of the State to impose and demand contribution upon persons,
properties, or rights for the purpose of generating revenues for public purposes. The power of
taxation upon necessity and is inherent in every government or Sovereignty.
Taxation is an inherent power of sovereignty, essentially a legislative function, enforced for
public purpose, operates only within its territorial jurisdiction, exempts government agencies
from tax (provided such agency performs governmental functions) and is subject to
constitutional and inhered limitations.
Nature of taxation:
1. Inherent Power of Sovereignty,
2. Legislative in nature;
3. Public purpose;
4. Territorial in operation,
5. Exemption of the Government;
6. Strongest among the inherent power of the State.
7. Subject of Constitutional provisions
Scope of Taxation:
In the absence of limitations provided by the Constitution, the power to tax is essentially
unlimited, plenary, comprehensive, far-reaching, and supreme Taxation compasses every
trade or occupation, every object or industry or possession of property. It levies a burden
which, in case of failure to discharge, seizure or confiscation of property may be enforced,
subject to due process of law.