Read here about different type of taxes and its benefit in india, about taxation in india. Tax is compulsory payment or you can say it compulsory contribution to government revenue by workers, income or business profit under an enactment. It may be imposed either in direct way or indirect way like added to the cost of goods, product, services or any transaction you do in your daily routine.
Why we pay Taxes :
we have to pay taxes to the government
- to fund infrastructural development,
- pay the salaries of those employed by the state or central governments, etc.
- All taxes are levied based on the passing of law.
Taxes are the government’s way of earning an income which can be used for various projects that the government needs to indulge in to help boost the country’s economy or its people. Taxes in India are decided on by the central and state governments with local governments, such as municipalities, also deciding on smaller taxes that can be levied within their jurisdiction. It must, however, be remembered that the government cannot impose any tax that it wishes to. All the taxes imposed by the government must be laws.
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Type of Taxes
Taxes are of two distinct types, direct and indirect taxes. The difference comes in the way these taxes are implemented. Some are paid directly by you, such as the dreaded income tax, wealth tax, corporate tax etc. while others are indirect taxes, such as the value added tax, service tax, sales tax, etc.
- Direct tax: Direct tax is a type of tax which is directly paid by people to government. Example of direct tax are INCOME TAX, WEALTH TAX etc. These taxes are imposed directly on an individual or entity and are not transferable onto anyone else. CBDT (Central Board of Direct Taxes) is statutory body working under Central Board of Revenue Act, 1963. It overlook these direct taxes.
- Indirect tax: Indirect tax means a tax paid to government by person other than the person who bears the burden of the tax, VAT (Value Added Tax) is most common example on indirect tax. some other example includes Custom Duty, Excise Duty and Sales Tax etc. These taxes are imposed by adding them to the price of the service or product which tends to push the cost of the product up.
Benefits of Taxes
Even though most people are always at odds with the idea of taxation, there are some advantages to taxes, the least of which is that it provides the government the resources it needs for economic development.
Some of the other benefits of taxes are:
- It encourages savings and investments because if a person invests in certain instruments, then the amount invested is reduced from their taxable income thus bringing down the tax they have to pay. This investment is subject to certain limits that are detailed in the Income Tax Act.
- Paying taxes means that you have to file your tax return which in turn means that when you apply for a home loan for that home loan, it’s easier to get it because one of the things many banks require is proof that you have been filing taxes regularly.