INTRODUCTION

TO TAX
INTRODUCTION
Tax is the amount paid by persons staying within a
territorial limit of a Sovereign state and is levied on
individuals, goods, property, business, services etc.
There is no direct quid pro quo between the tax
payers and the public authority.
It is used for public purposes
Refusal to pay a tax is a punishable offence.
A tax is payable regularly and periodically as
determined by the taxing authority.
TAXATION OBJECTIVES

TAXATIO
N
OBJECTIV
ES

SUBSIDIA
KEY
RY
OBJECTIV
OBJECTIV
ES
ES
KEY & SUBSIDIARY OBJECTIVES

REVENUE
GENERATION
Accelerate savings
& investment
Maintenance of Welfare
State

Prevention & Rapid economic

concentration of wealth development
in a few hands

Re-distribution of wealth Generation of

for the common good
employment
avenues
DIRECT TAXES
 Direct tax is a tax which is paid by the person on
whom the tax has been imposed. It means that he
cannot transfer the liability of tax on some other
person.
 The IMPACT and INCIDENCE of tax falls on the
same person. The term IMPACT here means he
who has to pay & INCIDENCE means who
ultimately pays.
 Examples are income tax, wealth tax, gift tax etc
INDIRECT TAXES
 Indirect taxes are those taxes the burden of which by
nature is shifted and which are paid by tax payer
directly i.e. while purchasing goods and commodities,
paying for services etc.
 The Impact is on one person and incidence on another
eg. Sales tax is paid by seller who collects it from
buyer.
 Examples are Central Excise Duty, Customs Duty,
Central sales tax, Service tax, value added sales tax,
octroi, interest tax.
FEATURES OF INDIRECT TAX
 Shifting of tax burden
 Basis of levy
 No direct pinch to the taxpayer
 Easier to collect, greater amount of generation of
revenue, tax evasion is comparatively less.
 Taxes directly affects the price of commodities.
 DIRECT TAXES vs INDIRECT TAXES
DIRECT TAXES INDIRECT TAXES

1) It contributes about 56% of total tax It contributes about 46% of total tax
revenue. Rs 11.50 lakh crore was collected revenue. Rs 7.43 lakh was collected in
in 2018-19 2018-19

2)They do not have any impact on costs Increase in rates of indirect taxes leads to
and prices of goods increase in costs and prices of goods

3) Income tax, inheritance tax, expenditure Central excise duty, customs duty, sales tax,
tax, property & corporation tax are the service tax are the examples
examples

4)These taxes confirm to the Principle of They donot discriminate between rich and
equity poor. The levy is against the principle of
equity
5)This tax is levied on income and The burden of indirect taxes fall on the
wealth tax is tax levied on property/ rich and poor alike. They are taxes on
assets of an assessee. Thus they donot consumption. Thus they affect lower
affect those with low income/wealth income group.

6)They have an element of certainty. The Tax evasion is less likely in the case of
taxpayer knows the amount of tax payable indirect taxes
by him after claiming all deductions and
rebates.

7)Direct taxes do not affect prices of Tax on Goods and Services increases its
goods and services price and reduces demand
CLASSIFICATION OF TAXES
 PROGRESSIVE TAXATION- A tax is called progressive when
with increasing income, the tax liability not only increases in
absolute terms, but also it increases as a proportion of income.
Example- income tax.
 PROPORTIONAL TAXATION(flat tax)- If the tax liability
increases in the same proportion as the increase in the tax-payers
income, it is known as proportional taxation. All incomes are
taxed at a uniform rate. Eg- sales tax
 REGRESSIVE TAXATION- With the increase in income, the tax
rate decreases, in such regressive taxes. Eg- taxes on necessities
 DIGRESSIVE TAXATION- In this case, there is a declining
degree of progression as the tax base increases. The rate of tax
increases up to a certain limit beyond which a uniform rate is
charged.