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he tax structure in India is divided into direct and indirect taxes. While direct taxes are levied on taxable income earned by individuals and corporate entities, the burden to deposit taxes is on the assessees themselves.

 

INDIAN TAXATION SYSTEM

The tax structure in India is divided into direct and indirect taxes. The implementation of both the taxes differ.

 

DIRECT TAXES are levied on taxable income earned by individuals and corporate entities, the burden to deposit taxes is on theassesse themselves.

 

INDIRECT TAXES are levied on the sale and provision of goods and services respectively and the burden to collect and deposit taxes is on the sellers instead of the assesse directly.

DIRECT TAX

  • A. Income Tax Act:

An income tax is a tax that governments impose on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations. Income taxes are a source of revenue for governments.

  • B. Wealth Tax Act:

The Wealth Tax Act was enacted in 1951 and is responsible for the taxation related to the net wealth of an individual, a company or a Hindu Unified Family. The simplest calculation of wealth tax was that if the net wealth exceeded Rs. 30 lakhs, then 1% of the amount that exceeded Rs. 30 lakhs was payable as tax. It was abolished in the budget announced in 2015. It has since been replaced with a surcharge of 12% on individuals that earn more than Rs. 1 crore per annum. It is also applicable to companies that have a revenue of over Rs. 10 crores per annum. The new guidelines drastically increased the amount the government would collect in taxes as opposed the amount they would collect through the wealth tax.

  • C. Gift Tax Act:

The Gift Tax Act came into existence in 1958 and stated that if an individual received gifts, monetary or valuables, as gifts, a tax was to be to be paid on such gifts. The tax on such gifts was maintained at 30% but it was abolished in 1998. Initially if a gift was given, and it was something like property, jewellery, shares etc. it was taxable. According to the new rules gifts given by family members like brothers, sister, parents, spouse, aunts and uncles are not taxable. Even gifts given to you by the local authorities is exempt from this tax. How the tax works now is that if someone, other than the exempt entities, gifts you anything that exceeds a value of Rs. 50,000 then the entire gift amount is taxable.

What is Income Tax Slabs?

In India, income tax is levied on individual taxpayers on the basis of a slab system where different tax rates have been prescribed for different slabs and such tax rates keep increasing with an increase in the income slab.

Such tax slabs tend to undergo a change during every budget.

 

1. INCOME TAX SLAB RATE FOR INDIVIDUALS

 

1.1 Individual(resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year:
Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

 

1.2  Resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:
Taxable income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 – Rs. 5,00,000 5%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

 

1.3 Resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year:

Taxable income Tax Rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Plus:

Surcharge: 10% of tax where total income exceeds Rs. 50 lakh

15% of tax where total income exceeds Rs. 1 crore

Education cess: 3% of tax plus surcharge

2.INCOME TAX RATES FOR HUF/AOP/BOI/ANY OTHER ARTIFICIAL JURIDICAL PERSON:
Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
3.TAX SLAB RATE FOR DOMESTIC COMPANY:

A domestic company is taxable at 30%. However, tax rate is 25% if turnover or gross receipt of the company does not exceed Rs. 50 crore.

4. TAX RATES FOR FOREIGN COMPANY:

A foreign company is taxable at 40%

SURCHARGE for Individual/HUF/ AOP/ BOI/ Artificial Judicial Person

Net Income for Individual/HUF/ AOP/ BOI/ Artificial Judicial Person exceeds 50 Lacs But doesn’t exceeds 1 Cr.  = Rate of Surcharge @ 10%

Net Income for Individual/HUF/ AOP/ BOI/ Artificial Judicial Person exceeds 1 Cr. But doesn’t exceeds 2 Cr.  = Rate of Surcharge @ 15%

Net Income for Individual/HUF/ AOP/ BOI/ Artificial Judicial Person exceeds 2 Cr. But doesn’t exceeds 5 Cr.  = Rate of Surcharge @ 25%

Net Income for Individual/HUF/ AOP/ BOI/ Artificial Judicial Person exceeds 5 Cr. = Rate of Surcharge @ 37%

SURCHARGE for Firm/LLP/Local authorities/Co-operative Society

Net Income exceeds 1 Cr. = Rate of Surcharge @ 12%

SURCHARGE for Domestic Company

Net Income exceeds 1 Cr. But doesn’t exceeds 10 Cr. = Rate of Surcharge @ 7%

Net Income exceeds 10 Cr. = Rate of Surcharge @ 12%

SURCHARGE for Foreign Company

Net Income exceeds 1 Cr. But doesn’t exceeds 10 Cr. = Rate of Surcharge @ 2%

Net Income exceeds 10 Cr. = Rate of Surcharge @ 5%

 

Education cess: 4% of tax plus surcharge

 

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