Professional Documents
Culture Documents
General Economics
TAX
Important Source of Revenue of the Government. Compulsory Contribution from a Person to the Expenses incurred by the State in common Interest of all without reference to Specific benefits conferred on any Individual.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 2
Tax
Direct Taxes e.g. Income Tax, Wealth Tax Indirect Taxes e.g. Custom Duty, Excise Duty, etc.
3
Tax
Direct Taxes are the Taxes which are not shifted i.e., the Incidence of which falls on Persons who pay them to the Government. For Example, Income Tax and Wealth Tax. Indirect Taxes are the Taxes in which the burden of paying Tax is shifted through a Change in Price. For Example, Custom Duty, Excise Duty, etc.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 4
Income Tax
Income Tax is a Tax on the Income of an Individual or an Entity. Introduced in India in the year 1860. Discontinued in the year 1873. Reintroduced in the year 1886.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 11
Income Tax
Personal Income Tax
Levied on the Income of Individuals, Hindu Undivided Family (HUF), Unregistered Firms & other Association of People (AOP).
12
Tax Slabs are different for Men, Women & Senior Citizen. For Women there is no Tax for Income below Rs.1.80 Lakh. Senior Citizens need not pay Tax for Income below Rs General Economics: Tax System in 14 India,Budget & Fiscal Deficits in India 2.25 lakh.
Gift Tax
Gift Tax was introduced in 1958. Gift Tax was leviable on all Donations to Recognized Charitable Institutions, Gifts to Women Dependents & Gifts to Wife. Gift Tax was abolished in 1998.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 19
Custom Duties
Custom Duties are levied on Exports & Imports. From the point of View of Revenue, Importance of Export Duty is Limited. Import Duties are levied on the basis of ad valorem. In Pre-Tax Reform Period, India had become a country with one of the highest levels of Custom Tariffs in the World. Since 1991, the Custom Duty Structure was pruned. Maximum Rate of General Economics: Tax System inis 10% now. Custom Duty 20
India,Budget & Fiscal Deficits in India
Excise Duties
An Excise Duty is levied on Production & has absolutely on Connection with its Actual Sales. These are levied by the Central Government in a number of forms. Taxation on Inputs, such as Raw Materials, Components has a number of Limitations. To remove these, Government introduced Modified Value Added Tax (MODVAT) in 198687.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 21
Excise Duties
Value Added is the difference between a Firms Revenues & its Payments to other Firms i.e., it is the Value Difference between Sales & Purchased Items.
Under MODVAT, a Manufacturer can take Credit of Excise Duty paid on Raw Materials and Components used by him in his Manufacture.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 22
Excise Duties
Since it amounts to Excise Duty only on Additions in Value by each Manufacturer at each stage, it is called Value-Added-Tax (VAT). MODVAT differs from VAT. VAT covers the entire value of Inputs where as under MODVAT Duty paid Inputs only.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 23
Excise Duties
To Overcome the Limitations of MODVAT, the Budget 2000-01 introduced the Central Value-Added Tax [CENVAT]. CENVAT is applicable on the Excisable Goods made in India. Basic Excise Duty is 16% & some Special Excise Duties which are levied in addition to CENVAT.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 24
Excise Duties
The basic Excise paid on Excisable Goods can be deducted from the Excise collected on the Output so that only Tax on Value Added is paid. CENVAT reduces Cascading effect of Input Taxation. System has certain shortcomings such as Cumbersome Procedures, Inadequate Coverage of CENVAT, scope of Tax-Evasion.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 25
Sales Tax
Sales Tax is a Tax on Business Transactions. In India, many Commodities are not covered by Sales Tax. Sales Tax is more in case of Luxury Items & Less or almost nil in case of Necessities. Registered Trading Concerns are required to pay the Sales Tax to the Government who shift the Burden to the Customers. Problems: Cascading Effect, Lack of Transparency, Narrow Base, different Procedures followed by different States, etc.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 26
Service Tax
Service Tax is a form of Indirect Tax imposed on Specified Services called Taxable Services. It was introduced in the year 1994-95. Service Tax Network has expanded to cover many Services over the Years.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 29
Inflexible Taxation System as it largely depends on Urban Incomes & leaves out Agricultural Income.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 33
Budget Deficit
Budget is prepared by the Government of India showing the Expected Receipts & Expenditures in the coming Financial Year. Receipts of the Government come from Taxes (both Direct and Indirect), Profits form various Financial Institutions, Government Commercial Undertakings, Interest from Loans given to Other Governments, Local Bodies, etc.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 36
The Expenditure of the Government are on Developmental Projects such as Construction of Roads, Railways, Production of Energy & NonDevelopmental Expenditure on a Large Number of Activities such as Defense, Subsidies, Police, Law & Order, etc. If Receipts are equal to Expenditure, the Budget is said to be Balanced. If Receipts are higher than the Expenditure, the Budget is said to be Surplus & if Receipts are lower than the Expenditure, the Budget is said to be Deficit.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 37
Budget Deficit
Budget Deficit is thus the Difference between Total Receipts and Total Expenditure (Revenue plus Capital). If Borrowings and other Liabilities are added to the Budget Deficit, we get Fiscal Deficit.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 38
Budget Deficit
Fiscal Deficit
Fiscal Deficit, measures that part of Government which is Financed by Borrowings. Fiscal Deficit in India is a more Comprehensive Measure of the Imbalances. It is the measures of Excess Expenditure over the Governments own Income.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 39
2004-05 Rs. (Crore) 3,51,200 1,63,144 12,000 1,51,144 5,14,344 1,15,982 67,832 5,14,344 Nil 1,51,144
40
Q1
Which of the following is not the Merit of Direct Taxes. Find it. a) They are imposed according to the Ability of the Person to Pay. b) These Taxes create Civil Consciousness. c) The Revenue is Income Elastic. d) They do not require maintenance of Accounts.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 45
Q2
Find the Tax which is Direct Tax among the following: a) Personal Income Tax. b)Excise Duty. c) Sales Tax. d)Service tax.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 46
Q3
Indian Taxation System is characterized by: a) A High Dependence on Indirect Taxes. b) Low Average Effective Tax Rates & Tax Productivity. c) High Marginal Effective Tax Rates & large Tax-induced Distortions on Investments & Financing Decisions. d) All of the Above.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 47
Q4
Among the following types of Taxes, find the one which is Indirect?
a) Gift Tax b) Corporate Income Tax c) VAT d) Wealth Tax
48
Q5
Which of the following statements is Correct?
a) Income Tax was abolished in India in 1991. b) Gift Tax was abolished in India in 1998. c) All the States have adopted VAT System of Indirect Taxation. d) Estate Duty was abolished in 1995.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 49
Q6
Which of the following statements is Correct?
a) Excise Duty is levied on Sales Volume. b) Custom Duties have been drastically cut down since 1991. c) VAT has been adopted by all the States in India. d) Agriculture contributes the Maximum to the Direct Tax Revenues in India.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 50
Q7
When the Government tries to meet the Gap of Public Expenditure & Public Revenue through Borrowing from the Banking System, it is called ___________
a) b) c) d) Deficit Financing. Debt Financing. Credit Financing. None of the Above.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 51
Q8
_________ is the difference between Total Receipts & Total Expenditure.
a) Fiscal Deficit. b) Budget Deficit. c) Revenue Deficit. d) Capital Deficit.
52
Q9
If Borrowing & Other Liabilities are added to the Budget Deficit we get
a) Revenue Deficit. b) Capital Deficit. c) Primary Deficit. d) Fiscal Deficit.
53
Q 10
FRBM Act stands for
a) Fiscal Revenue & Budget Management. b) Foreign Revenue & Business Management. c) Fiscal Responsibility & Budget Management. d) Foreign Responsibility & Budget Management.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 54
Q 11
On which of the Following, Income Tax is not imposed in India?
a) Income from Salary. b) Income from House Property. c) Interest on Fixed Deposits. d) None of the Above.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 55
Q 12
PPF stands for:
a) Private Provident Fund. b)Personal Provident Fund. c) Public Provident Fund. d)Public Presidency Fund.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 56
Q 13
Income Tax was introduced first time in India in 1860 & then discontinued in1873. It was re-introduced in the year:
a) 1885 b) 1886 c) 1887 d) 1890
57
Q 14
Which of the following is not the example of Direct Tax?
a) VAT b)Wealth Tax c) Corporate Tax d)Income Tax
General Economics: Tax System in India,Budget & Fiscal Deficits in India 58
Q 15
Excise Duty is imposed on
a) Goods Imported in India. b)Goods Sold in India. c) Goods Manufactured in India. d)Goods Exported from India.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 59
Q 16
Wealth Tax was abolished in:
a) 1985 b)1998 c) 2005 d)False it is still continuing
General Economics: Tax System in India,Budget & Fiscal Deficits in India 60
Q 17
CENVAT was introduced in the year:
a) 2001-02 b)2000-01 c) 2002-03 d)2004-05
General Economics: Tax System in India,Budget & Fiscal Deficits in India 61
Q 18
The Basic Rate of Excise Duty is:
a) 6% b)16% c) 24% d)None of the Above.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 62
Q 19
Ad Valorem Duty means Duty imposed on the basis of:
a) Percentage of Price of Commodity. b) Per unit of the Commodity. c) Both (a) & (b). d) None of the Above.
General Economics: Tax System in India,Budget & Fiscal Deficits in India 63
Q 20
Under which of the following Tax System, more Tax is imposed on the Lower Income Group?
a) Regressive b) Progressive c) Value Added Tax d) Proportional Tax
64
THE END
Tax System in India, Budget & Fiscal Deficits in India