Direct Taxes

The various types of direct tax that are imposed in India are mentioned below:

 Income Tax: Depending on an individual's age and earnings, income tax must be
paid. Various tax slabs are determined by the Government of India which determines
the amount of Income Tax that must be paid. The taxpayer must file Income Tax
Returns (ITR) on a yearly basis. Individuals may receive a refund or might have to
pay a tax depending on their ITR. Huge penalties are levied in case individuals do not
file ITR.
 Wealth Tax: The tax must be paid on a yearly basis and depends on the ownership of
properties and the market value of the property. In case an individual owns a property,
wealth tax must be paid and does not depend on whether the property generates an
income or not. Corporate taxpayers, Hindu Undivided Families (HUFs), and
individuals must pay wealth tax depending on their residential status. Payment of
wealth tax is exempt for assets like gold deposit bonds, stock holdings, house
property, commercial property that have been rented for more than 300 days, and if
the house property is owned for business and professional use.
 Estate Tax: It is also called as Inheritance Tax and is paid based on the value of the
estate or the money that an individual has left after his/her death.
 Corporate Tax: Domestic companies, apart from shareholders, will have to pay
corporate tax. Foreign corporations who make an income in India will also have to
pay corporate tax. Income earned via selling assets, technical service fees, dividends,
royalties, or interest that is based in India are taxable. The below-mentioned taxes are
also included under Corporate Tax:
o Securities Transaction Tax (STT): The tax must be paid for any income that
is earned via security transactions that are taxable.
o Dividend Distribution Tax (DDT): In case any domestic companies declare,
distribute, or are paid any amounts as dividends by shareholders, DDT is
levied on them. However, DDT is not levied on foreign companies.
o Fringe Benefits Tax: Companies that provide fringe benefits for maids,
drivers, etc., Fringe Benefits Tax is levied on them.
o Minimum Alternate Tax (MAT): For zero tax companies that have accounts
prepared according to the Companies Act, MAT is levied on them.
 Capital Gains Tax: It is a form of direct tax that is paid due to the income that is
earned from the sale of assets or investments. Investments in farms, bonds, shares,
businesses, art, and home come under capital assets. Based on its holding period, tax
can be classified into long-term and short-term. Any assets, apart from securities, that
are sold within 36 months from the time they were acquired come under short-term
gains. Long-term assets are levied if any income is generated from the sale of
properties that have been held for a duration of more than 36 months.