Taxation system in India

The taxation system in India

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In this article, we are going to see about the taxation system of India.
Taxes are broadly classified into two main categories:

Direct taxes and indirect taxes.

Direct Taxes: 

A Direct tax refers to any levy that is both imposed and collected on the same person.
for example of direct tax is the income tax that is imposed and collected from the person on their income.

Indirect Taxes:

Let us understand indirect taxes with the help of an example.
Goods and Services Tax is an indirect tax because the tax money is collected from the shopkeeper.
When a shopkeeper sells commodities to consumers, he includes the Goods and Service Tax in the selling price of commodities.
He recovers the sales tax from consumers and deposits the tax with the government.
Thus, Sales tax is collected from the shopkeeper but the tax burden is eventually on consumers.
Thus, we can conclude that Indirect taxes are imposed on one person but collected from another person.
Now, let's see about the taxes which contribute the maximum to our government revenue Income Tax.
It is a direct tax levied on the income of individuals or organizations.
When Income tax is levied on individuals, it is called income tax. 

When income tax is levied on organizations (such as partnership firms, companies, etc.), it is called a corporate tax.

The various types of income covered under income tax are

1. Salary: It is remuneration received for the work done by an employee from his/her employer.
2. Income from House Property is the Rental income earned from Property.
3. Income from Business or Profession: These are the profits earned by running a business or carrying out a profession.
4. Capital gains are Profits arising from the sale of an asset.
5. Other Incomes include earnings on account of interest from a lottery, gambling or any other source of income apart

from the sources mentioned above.

Let us see now about important indirect taxes These are:
Goods and Service Tax, (only on some products Excise Duty, Sales Tax (Popularly called VAT),

Customs Duty.
Customs Duty Customs duty is an indirect tax that is paid on the import of any product into the country or the export of any product outside the country.

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From 1st July 2017, Excise Duty, Sales Taxand Service Tax have been replaced by
Goods and Services Tax that is GST. It is a short overview of the Taxation system in India.