TAXATION
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What is tax?
Taxes are levied by governments on their citizens to generate income for undertaking projects to boost the economy of the country and to raise the standard of living of its citizens. The authority of the government to levy tax in India is derived from the Constitution of India, which allocates the power to levy taxes to the Central and State governments. All taxes levied within India need to be backed by an accompanying law passed by the Parliament or the State Legislature.
Types of Taxes:
- Direct Taxes
- Indirect 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.
But, besides these two conventional taxes, there are also other taxes that have been brought into effect by the Central Government to serve a particular agenda. ‘Other taxes’ are levied on both direct and indirect taxes such as the recently introduced Swachh Bharat Cess tax, Krishi Kalyan Cess tax, and infrastructure Cess tax among others.
Income Tax:
This is one of the most well-known and least understood taxes. It is the tax that is levied on your earning in a financial year. There are many facets to income tax, such as the tax slabs, taxable income, tax deducted at source (TDS), reduction of taxable income, etc. The tax is applicable to both individuals and companies. For individuals, the tax that they have to pay depends on which tax bracket they fall in. This bracket or slab determines the tax to be paid based on the annual income of the assessee and ranges from no tax to 30% tax for the high income groups.
Income tax slab for individual tax payers & HUF (less than 60 years old) (both men & women)
| Income Tax Slab | Tax Rate |
| Income up to Rs. 2,50,000* | No Tax |
| Income from Rs. 2,50,000 – Rs. 5,00,000 | 5% |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Surcharge: 10% of income tax, where total income isbetween Rs. 50 lakhs and Rs.1 crore. 15% of income tax, where total incomeexceeds Rs. 1 crore. | |
| Cess: 3% on total of income tax + surcharge. | |
| * Income upto Rs. 2,50,000 is exempt from tax if youare less than 60 years old. | |
Incometax slab for individual tax payers & HUF (60 years old or more but lessthan 80 years old) (both men & women)
| Income Tax Slab | Tax Rate |
| Income up to Rs. 3,00,000* | No Tax |
| Income from Rs. 3,00,000 – Rs. 5,00,000 | 5% |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Income more than Rs. 10,00,000 | 30% |
| Surcharge: 10% of income tax, where total income isbetween Rs. 50 lakhs and Rs.1 crore. 15% of income tax, where total incomeexceeds Rs.1 crore. | |
| Cess: 3% on total of income tax + surcharge. | |
| * Income up to Rs. 3,00,000 is exempt from tax if youare more than 60 years but less than 80 years of age. | |
Incometax slab for super senior citizens (80 years old or more) (both men &women)
| Income Tax Slab | Tax Rate |
| Income up to Rs. 2,50,000* | No Tax |
| Income up to Rs. 5,00,000* | No Tax |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Income more than Rs. 10,00,000 | 30% |
| Surcharge: 10% of income tax, where total income isbetween Rs. 50 lakhs and Rs.1 crore. 15% of income tax, where total incomeexceeds Rs.1 crore. | |
| Cess: 3% on total of income tax + surcharge. | |
| *Income up to Rs. 5,00,000 is exempt from tax if youare more than 80 years old. | |
Income Tax Slab for General Taxpayers :
| Income Tax Slab | Tax Rate |
| 0 – 2,50,000 | No TAX |
| 2,50,001 – 5,00,000 | 10% tax |
| 5,00,001 – 10,00, 000 | 20% tax |
| Above 10,00,000 | 30% tax |
Income Tax Slab for SeniorCitizens (Ages between 60 to 80 years) :
| Income Tax Slab | Tax Rate |
| 0 – 3,00,000 | No tax |
| 3,00,001 – 5,00,000 | 10% tax |
| 5,00,001 – 10,00, 000 | 20% tax |
| Above 10,00,000 | 30% tax |
Income Tax Slab for Super Senior Citizens(Ages Above 80 years) :
| Income Tax Slab | Tax Rate |
| 0 – 5,00,000 | Nil |
| 5,00,001 – 10,00, 000 | 20% tax |
| Above 10,00,000 | 30% tax |
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 IT Act.
- Paying taxes means that you have to file your tax returns 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.
Penalty for Not Paying Taxes:
Each type of tax has its own penalties associated with it. These penalties can range from fines to imprisonment depending on the severity of the crime. In some cases the penalty could be that you will have to pay what is owed in taxes along with additional sums as fine, which are decided upon by government officials.
It is always advisable to pay taxes on time and always be aware of the taxes that you, as a consumer, are liable to pay so that no-one can take you for a ride.
It is always advisable to pay taxes on time and always be aware of the taxes that you, as a consumer, are liable to pay so that no-one can take you for a ride.
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