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TAX SYSTEM IN INDIA TAX-It is an important source of revenue of the government.

It is a compulsory contribution from a person to the expenses incurred by the state in common interest of all without referring to specific benefits. TAX

DIRECT TAX

INDIRECT TAX

DIRECT TAX-Taxes which are directly paid by the person to the government. Example Income Tax and wealth Tax. INDIRECT TAX-Taxes in which the burden of paying taxes is shifted by the change in the price. Example Custom duty and excise duty. ADVANTAGES OF DIRECT TAX. 1. 2. 3. 4. Imposed according to the ability of the person to pay. Revenue is income elastic. Create better civic consciousness. Serve the purpose of transfer of money from rich to poor.

DISADVANTAGES OF DIRECT TAX 1. Because of undeclared sources of income actual payment may not be according to the pay. 2. Necessitate proper maintenance of account which some tax player may not be able to do. 3. Cumbersome assessment procedure requiring expert procedure. ADVANTAGES OF INDIRECT TAX 1. Inclusion of tax in the price. 2. Difficult to evade from tax. 3. Tax on drink, tobacco serves a social purpose by discouraging their consumption. DISADVANTGES OF INDIRECT TAX 1. Do not create social awareness as Payment of tax is not felt by the payer

2. Customer has to bear the ultimate burden of tax. 3. Can be evaded by the method of smuggling, falsifying of accounts.

Income Tax Direct Tax Wealth tax Gift Tax

Custom Duties Excise Duties Indirect Tax Sales Tax Service Tax

INCOME TAX Tax on the income of an individual or entity which was introduced in the year 1860. It is divided into 2 taxex. Personal income tax- Levied on the income of individual of undivided Hindu family.

Income tax slabs 2011-2012 for General tax payers


Income tax slab (in Rs.) 0 to 1,80,000 1,80,001 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000 Tax No tax 10% 20% 30%

Income tax slabs 2011-2012 for Women


Income tax slab (in Rs.) 0 to 1,90,000 1,90,001 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000 Tax No tax 10% 20% 30%

Corporate income tax- Levied on the income of registered companies of Corporation. They are required to pay a tax on behalf of the shareholders on dividend paid to them. They are taxed on flat rate and certain rebate and exemption are also provided. Tax rates are different for Indian and foreign companies.

Wealth Tax
Wealth tax came into existence on 1st April 1957. Wealth tax is derived from the property owned by the proprietor. The proprietor needs to pay tax every year on property owned by them. The residential property that does not yield any income to its owner is also subjected to wealth tax. Wealth tax is termed as most significant direct tax. As per the wealth tax act, wealth tax is applicable to the following:
y y y y y y y

An individual person A group of people who own a property A company or organization A Hindu undivided family (HUF) Person belongs to 1-by -6 categories A representative or heir of a dead person Non corporative tax payer

The chargeability of a wealth tax in India for its residence or foreign citizens are different. Any person who is resident of India has to pay wealth tax under his/her name. If owner of property is deceased, heir of the property is bound to pay the wealth tax of the property. If a person owns a citizenship of a foreign country and he/she acquires a property in India as well as in foreign country. Under those circumstances the property owned by the owner in India is taxable where as property located outside India is exempted from the list. All assets and debts outside India are out of the scope of Wealth Tax Act. Gift Tax. Gifts made after September 30, 1998 are not subject to gift tax. However, under section 56(2)(vi) for gifts received after March 31, 2006, if the gifts are received by an individual or HUF without consideration and if the aggregate amount of such money received exceeds Rs. 50,000 in a financial year, the entire amount is taxable as other income. That is if a sum of money received by an individual or HUF without consideration exceeds Rs. 50,000 the entire amount is chargeable to tax. If the amount is Rs. 50,000 or less, nothing would be chargable to tax. There are many exceptions to the provision of section 56(2)(vi) for gifts: 1. Received from relatives (see List of Relatives), 2. Received on the occasion of the marriage, 3. Received by will or inheritance, 4. Received from local authority, 5. Received from any foundation, university or educational institution, hospital or medical institution, or any trust or institution referred to in section 10(23C), and 6. Received from a charitable institution registered under section 12AA.

Custom duties- Custom duties are levied on Export and Import. Maximum Rate of Custom duty is
10%. Custom Duty is imposed under the Indian Customs Act formulated in 1962 by the Constitution of India under the Article 265, which states that no tax shall be levied or collected except by authority

of law. So, the Indian Custom Act was introduced that allow the Central Government to collect the taxes under the name of Custom Duty. Custom Duties are usually levied with ad valorem rates and their base is determined by the domestic value 'the imported goods calculated at the official exchange rate. Similarly, export duties are imposed on export values expressed in domestic currency. Export duties are levied occasionally to clear up excess profitability in international price of goods in respect of which domestic prices may be low at given time. But the concept of import duty is wide and almost universal, except for a few goods like food grains, fertilizer, life saving drugs and equipment etc. The Indian Customs Duties are major source of revenue for the Union Government and constitute around 30% of its tax revenues. Together with Central Excise duties, the contribution amount to nearly three-fourth of total tax revenue of the Union Government. Excise Duty- An excise or excise tax (sometimes called a duty of excise special tax) is commonly referred to as an inland tax on the sale, or production for sale, of specific goods; or, more narrowly, as a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are distinguished from customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties are border taxes. An excise is considered an indirect tax, meaning that the producer or seller who pays the tax to the government is expected to try to recover the tax by raising the price paid by the buyer (that is, to shift or pass on the tax). Excises are typically imposed in addition to another indirect tax such as a sales tax or VAT. In common terminology (but not necessarily in law) an excise is distinguished from a sales tax or VAT in three ways: (i) an excise typically applies to a narrower range of products; (ii) an excise is typically heavier, accounting for higher fractions (sometimes half or more) of the retail prices of the targeted products; and (iii) an excise is typically specific (so much per unit of measure; e.g. so many cents per gallon), whereas a sales tax or VAT is ad valorem, i.e. proportional to value (a percentage of the price in the case of a sales tax, or of value added in the case of a VAT). Sales Tax- A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may require it to be included in the price (tax-inclusive) or added to the price at the point of sale. Most sales taxes are collected from the buyer by the seller, who remits the tax to a government agency. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. Advantages that a sales tax generally has over other forms of taxation are that it is difficult to avoid, and simple to calculate and collect.