Tax System in India

A compulsory contribution given by a citizen or organisation to the Government is called Tax, which is used for meeting expenses on welfare work. Tax imposing and Tax collecting is at three levels in India-Central level State level and Local level.The distribution of tax between Centre and State has been clearly mentioned in the provision of India Constitution. For rationalising it from time to time, Finance Commission has been constituted.

Important Taxes imposed in India:

Tax on income and Wealth – the central government impose different types of tax on income and wealth, viz. Income, corporate tax, wealth tax and gift tax. Out of which income tax and corporate tax are more important from the revenue point of view.

Personal income Tax – personal income tax is generally imposed on an individual combined Hindu families and total income of people of any other communities.

Corporate Tax– Corporate tax is imposed on Registered Companies and Corporations. The rate of corporate tax on all companies is equal. However, various types of rebates and exemption have been provided.

Custom Duties – As per the Constitutional provision, the central Government imposes import duty and export duty both. Import and Export duties are not only source of income but with the help of it the central government regulates the foreign trade.

Import Duties– Generally import duties are ad-velorem in India. It means import duties are imposed on the taxable item on percentage basis.

Export Duties – Export duties are more important, compared to import duties in terms of revenue and regulation of foreign trade.

Excise Duties – Excise duties are commodity tax as it is imposed on production of an item and it has no relevance with its sale. This is the largest of an item and it has no Central Government.

Types of Tax:

Direct tax Income tax, Property tax, Gift tax etc.
Indirect tax Sales tax, Excise duty, Custom Duty etc.
Taxes imposed by the central Government. Income tax, Corporate tax, Property tax, Succession tax, wealth tax, gift tax, Custom duty , Tax on agricultural wealth etc.
Taxes imposed by the state Government. Land revenue tax, agricultural income tax, Agriculture Land revenue, state excise duty, Entertainment tax, stamp duty, Road tax, Motor Vehicle tax etc.
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