Every year at the end of the month of March, every company, organization, institution and the Government sector offices and even the employees working in the organizations etc. have so many questions revolving in their mind that- Do we need to Pay Tax? Are there any changes in the rates and schemes? Well, Taxes are mandatory. Every eligible citizen of India has to pay taxes.
What is Tax
Tax is a charge that is levied by the Central Government or the State Government of India. The tax charge is implemented for the betterment of the country’s economy and improving the standards and welfare of the country. The tax rules and the types of taxes are constituted by the Ministry of Finance’s Department of Revenue.
Different Types of Taxes in India
Various types of taxes in India are
- Direct Taxes
- Indirect Taxes
- Other Taxes
Direct Taxes are the taxes that are directly paid or imposed on the Government of India. These taxes are controlled by the Government body, Department of Revenue named as Central Board of Direct Taxes (CBDT). The different types of direct taxes in India are
- Income Tax– Income Tax in India is levied on anybody who earns an income in India, whether they are resident and non-resident. They are classified into some categories like- individual person, Hindu Undivided Family (HUF), Association of Person (AOP), Body of Individuals, Corporate Firms, Companies, Local Authorities and another artificial jurisdictional person who have earned an income and they are eligible to pay the income tax. The Income tax is charged on the total income of the previous year at the rates prescribed for the particular assessment year. According to the assessment year of 2017-2018, the income tax rates are categorized on the basis of the income slab.
The income tax rates are distributed in 5%, 10%, 20%, and 30% on the basis of the total income. A Surcharge of 10% of the income tax is added for the income between Rs 50 Lacs to 1 Crore. A surcharge of 15% is charged if the total income exceeds Rs 1 Crore. An Educational Cess of 3% is also charged in case of every individual.
For more details regarding the Income Tax rates for FY 17-18 please click here
- Capital Gains Tax– It is a tax gain on capital. If you are selling a property, bond or dealing any contract and you are gaining a profit in it, then you need to pay Capital Gains Tax. This type of tax is of two types- short term and long term. The long-term Capital Gains Tax is charged if the capital assets are charged for more than 1 year in a shared case and 3 years in the case of contract whereas short-term Capital Gains Tax is charged if it is less than the certain period mentioned above for the long term.
- Securities Transaction Tax– This type of tax is applicable, on the platform of stock exchange. If you are buying or selling equity shares, derivative instruments, equity oriented Mutual Funds, then the Security Transaction Tax is implemented.
The Current Security Transaction Tax Rates
|Market Type||Current Rate|
|Future and Options||0.017%|
|Capital Market (Delivery)||0.125%|
|Capital Market (Intra-Day)||0.025%|
- Wealth Tax- This tax was imposed on one individual if their net wealth exceeds 30 lacs at the rate of 1% on the amount exceeding 30 lacs. Wealth Tax is no longer leviable from the assessment year 2016-17.
- Corporate Tax- Corporates are the annual or the yearly taxes that are payable on the income of the corporate organization operating in India. These are broadly classified as Domestic and Foreign Companies.
Indirect Taxes are the taxes that are not directly levied on the taxpayer or the individual but indirectly imposed on the expense incurred by the individual. Like for an example, when we buy any product, we pay GST (Previously VAT or Service Tax in case of Services). Following are the types of indirect taxes
- Good and Services Tax (GST)– It is a type of Indirect Tax which is charged on the sale, consumption, manufacture of Goods and services at the National Level. GST was amended by the Constitution of India (122nd Amendment Bill) 2014. GST is implemented for the country’s economic growth and reduce the overall tax burden on the goods in the country. The other taxes that are included in the umbrella of GST are
- Value Added Tax (VAT)– The Sales Tax is complimented with Value Added Tax to make it uniform across the country. These taxes are applied when the goods are sold completely and finally to the customer. The VAT is now a part of Goods and Service Tax (GST)
- Excise Duty– Excise duty is the type of indirect tax that is levied by the Government on the goods and commodities that are manufactured in India. These goods are meant for domestic consumption. Ex-Salt, sugar, newspapers, Tobacco, Gasoline, Alcohol etc. Excise is also a part of GST now.
- Service Tax– The Service providers are connected to the service tax. The service tax is charged on the aggregate amount that is received by the service provider. Example- leasing, The INTERNET, transportation etc. are subjected to the service tax. Service
- Customs Duty– These are the indirect taxes that are imposed on the goods that are imposed on the goods that are exported from India and imported to India.
- Sales Tax– These taxes are imposed by the Government on the sale and purchase of the goods in the Indian Market. These are charged on the movable goods. Anything you purchase in the market, you pay sales tax for it. Examples are- telephone, salon, the advertising company, health center etc. The last rate of the Sales tax is 14.5%. It is now replaced by GST as is the case with all above-stated taxes. For the restaurants serving alcohol, the tax charged will be 18%.
- Education, Healthcare are going to be exempted from GST.
- GST charges on the services on Non-AC Restaurants will be 12%.
- GST on Gold and Jewelry will be 3%
- GST on Diamond and Precious Stones will be 0.25%
- Petroleum Products and Liquor is not a part of the GST regime and is still under the VAT and Excise Model.
GST is divided into 3 parts
- Central GST (Levied by Union Government of India)
- State GST (Levied by Various State Governments)
- Integrated GST (Levied by Union Government when there is a movement of Goods or Services across state lines.
GST Rates comprises CGST + SGST which are equal and half of the below-given rates. GST Rate Slabs are given below
The GST Rates are distributed on the basis of the product category
|GST (0%)||Milk, jaggery, fresh vegetables, unbranded honey and paneer, coconut water, Prasad, salt|
|GST (5%)||Kerosene, Coal, tea, spectacles, cashew nuts, mat flooring, raisin, LPG, Footwear (<Rs 500), Apparels (<Rs 1000).|
|GST (12%)||Butter, ghee, almonds, umbrellas, mobiles, packed coconut water, preparations of vegetables, fruits like (Chutney, Jam, Jelly, Pickle)|
|GST (18%)||Hair Oil, toothpaste, computers, CCTV, cornflakes, staplers, ice cream, computer monitor (<17 inches), printers.|
|GST (28%)||Luxury Products, Betting, Horse Racing, 5 Star Hotels, Cinema Tickets etc.|
Other Indirect Taxes
- Professional Tax– It is the tax that is charged on the income on the basis of the profession or employment. An individual earning an income or anyone holding a profession such as a lawyer, doctor, interior or fashion designer etc.
- Municipal Tax– This tax is imposed by the local authority called as Municipality of the country. These are the local taxes that are paid to the Municipal Corporation if he or she owes a house property. These taxes are paid for the maintenance of sewage, road, civic services.
- Entertainment Tax– This tax is imposed by the State Government on the financial transaction that is related to the Entertainment. These taxes are imposed on movie tickets, stage/ theater shows, broadcasting, DTH and cable services. This tax is no longer active and covered under the umbrella of GST from July 1st, 2017 Onwards.
- Stamp Duty, Registration Fees, Transfer Tax– When you are purchasing a property then you have to pay additional charges like the stamp duty, registration fees, transfer tax etc. This tax is levied by the Government for preparing the legal documents of the property. This is the tax is imposed over the handling of the title of the property ownership from one person to another. The amount varies from property to property.
- Education Cess and Surcharge– The Education Cess is divided into two types – Primary Education Cess and Higher Secondary Education Cess. This tax is levied by the Government to improve the education quality in the public schools and colleges. It comprises of the 3% of the income tax. The Cess charges are also included under the GST family structure. Whereas, the surcharge is an extra charge that is clubbed to your existing tax calculation. This tax is applied on the tax amount.
- Gift Tax– If you receive the gift from someone, it is merged with your income and you need to pay tax on it. This tax is called Gift Tax. This tax is applicable if the amount is more than Rs 50,000/- in a year.
- Swachh Bharat Cess – This tax is recently imposed by the Government. The tax is applicable to all the taxable services from 15th November 2015. The effective rate of Swachh Bharat Cess is 0.5%. Swachh Bharat Cess is abolished after the introduction of GST.
- Krishi Kalyan Cess– This tax is levied for the welfare of the farmers. The effective rate of the Krishi Kalyan Cess is 0.5%. This tax came into effect in the year June 1st, 2016. Krishi Kalyan Cess has been abolished after the introduction of GST
- Entry Tax– This tax is levied or charged on the goods that are bought within the state or from outside the state. Entry Tax is separately charged by the State Government of India. This tax is also known as the Octroi Tax. Octroi is no longer levied after the introduction of GST.
Some other forms of taxes are
- Dividend tax
- Infrastructure tax
- Property tax
- Luxury tax
- Toll tax.
The above Cess mentioned like -Swachh Bharat Cess, Krishi Kalyan Cess, and the Entry Tax are no longer active now and they are clubbed with GST.
Latest Update- The latest report on tax says that after the introduction of the GST all the indirect taxes are merged under GST. So, the above taxes are removed due to the arrival of GST in the queue of Taxes. So, the taxes are reduced from number 25 to 10.