Direct and Indirect Taxes in India

A Direct levy is a kind of charge, which is obligate requirely on the nourish buy offer and paid directly to the government by the persons (juristic or natural) on whom it is imposed. A direct tax is one that cannot be shifted by the taxpayer to psyche else. The some important direct taxes imposed in India are as down the stairs Income revenue enhancement Income appraise get along, 1961 imposes tax on the income of the individuals or Hindu undivided families or firms or co-operative societies (other tan com scrapies) and trusts (identified as bodies of individuals associations of persons) or every artificial judicial person.The inclusion of a particular income in the total incomes of a person for income-tax in India is based on his residential status. There are three residential status, viz. , (i) Resident & Ordinarily Residents (Residents) (ii) Resident nevertheless not Ordinarily Residents and (iii) Non 72 Residents. There are several steps involved in determine the res idential status of a person. All residents are ratable for all their income, including income outside India. Non residents are ratable only for the income received in India or Income accrued in India.Not ordinarily residents are taxable in relation to income received in India or income accrued in India and income from business or concern assertled from India. Corporation levy The companies and business organizations in India are taxed on the income from their worldwide trans manageions under the preparedness of Income Tax Act, 1961. A corporation is deemed to be resident in India if it is incorpo prised in India or if its control and management is situated entirely in India.In case of non resident corporations, tax is levied on the income which is earned from their business transactions in India or any other Indian sources depending on zygomorphic agreement of that country. Property Tax Property tax or house tax is a local tax on buildings, along with appurtenant land, and im posed on owners. The tax power is vested in the states and it is delegated by natural law of nature to the local bodies, specifying the valuation method, rate band, and collection procedures. The tax base is the annual ratable value (ARV) or area-based rating.Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent. Vacant land is generally exempted from the assessment. The properties lying under control of interchange are exempted from the taxation. Instead a service charge is permissible under executive order. Properties of foreign missions to a fault enjoy tax exemption without an insistence for reciprocity. Inheritance ( domain) Tax An inheritance tax (also known as an estate tax or death tariff) is a tax which arises on the death of an individual.It is a tax on the estate, or total value of the money and property, of a person who has died. India enforced estate handicraft fr om 1953 to 1985. Estate debt instrument Act, 1953 came into existence w. e. f. 15th October, 1953. Estate transaction on rude land was give up under the Estate Duty (Amendment) Act, 1984. The levy of Estate Duty in respect of property (other than agricultural land) passing on death occurring on or after 16th March, 1985, has also been abolished under the Estate Duty (Amendment) Act, 1985.Gift Tax Gift tax in India is regulated by the Gift Tax Act which was constituted on 1st April, 1958. It came into effect in all parts of the country eject Jammu and Kashmir. As per the Gift Act 1958, all gifts in excess of Rs. 25,000, in the form of cash, draft, check or others, received from one who doesnt have blood relations with the recipient, were taxable. However, with effect from 1st October, 1998, gift tax got pulverise and all the gifts made on or after the date were free from tax. But in 2004, the act was again revived partially.A new provision was introduced in the Income Tax Act 1 961 under variance 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of Rs. 50,000 in a year would be taxable. Indirect Tax An indirect tax is a tax collect by an intermediary (such as a retail store) from the person who bears the ultimate frugal burden of the tax (such as the customer). An indirect tax is one that can be shifted by the taxpayer to someone else. An indirect tax may increase the price of a good so that consumers are in truth paying the tax by paying more for the products.The some important indirect taxes imposed in India are as under customs certificate of indebtednesss Duty The Customs Act was formulated in 1962 to oppose illegal imports and merchandises of goods. Besides, all imports are sought to be subject to a duty with a hear to affording protection to indigenous industries as well as to keep the imports to the minimum in the interests of securing the exchange rate of Indian currency. Duties of cus toms are levied on goods imported or exported from India at the rate qualify under the customs Tariff Act, 1975 as amended from time to time or any other law for the time being in force.Under the custom laws, the various types of duties are leviable. (1) Basic Duty This duty is levied on imported goods under the Customs Act, 1962. (2) Additional Duty (Countervailing Duty) (CVD) This is levied under section 3 (1) of the Custom Tariff Act and is equal to delete duty levied on a like product manufacture or produced in India. If a like product is not manufactured or produced in India, the excise duty that would be leviable on that product had it been manufactured or produced in India is the duty payable.If the product is leviable at different place, the highest rate among those rate is the rate applicable. Such duty is leviable on the value of goods plus radical custom duty payable. (3) Additional Duty to compensate duty on inputs used by Indian manufacturers This is levied under se ction 3(3) of the Customs Act. (4) Anti-dumping Duty Sometimes, foreign sellers abroad may export into India goods at prices below the amounts charged by them in their domestic markets in order to capture Indian markets to the detriment of Indian industry. This is known as dumping.In order to prevent dumping, the central Government may levy supererogatory duty equal to the margin of dumping on such articles. There are however legitimate restrictions on imposing dumping duties in case of countries which are signatories to the GATT or on countries given just about Favoured Nation Status under agreement. (5) Protective Duty If the Tariff Commission set up by law recommends that in order to protect the interests of Indian industry, the primal Government may levy restrictive anti-dumping duties at the rate recommended on specified goods. 6) Duty on 73 Bounty Fed Articles In case a foreign country subsidises its exporters for exporting goods to India, the central Government may im pose additive import duty equal to the amount of such subsidy or bounty. If the amount of subsidy or bounty cannot be clearly deter mined immediately, additional duty may be serene on a provisional basis and after final determination, difference may be collected or refunded, as the case may be. (7) Export Duty Such duty is levied on export of goods.At present very few articles such as skins and leather are subject to export duty. The main purpose of this duty is to restrict exports of genuine goods. (8) Cess on Export Under sub-section (1) of section 3 of the Agricultural & Processed Food Products Export Cess Act, 1985 (3 of 1986), 0. 5% ad valorem as the rate of duty of customs be levied and collected as cess on export of all scheduled products. (9) National Calamity depending on(p) Duty This duty was imposed under Section 134 of the Finance Act, 2003 on imported petroleum thoroughgoing(a) oil.This tax was also leviable on motor cars, imported multi-utility vehicles, 2 wheele rs and mobile phones. (10) Education Cess Education Cess is leviable 2% on the aggregate of duties of Customs (except safeguard duty under Section 8B and 8C, CVD under Section 9 and anti-dumping duty under Section 9A of the Customs Tariff Act, 1985). Items attracting Customs Duty at bound rates under international commitments are exempted from this Cess. (11) Secondary and Higher Education Cess Leviable 1% on the aggregate of duties of Customs. 12) avenue Cess Additional Duty of Customs on get Spirit is leviable and Additional Duty of Customs on High speed up Diesel Oil is leviable by the Finance Act (No. 2), 1998. and the Finance Act, 1999 respectively. (13) Surcharge on Motor Spirit special(prenominal) Additional Duty of Customs (Surcharge) on Motor Spirit is leviable by the Finance Act, 2002. Central scrub Duty The Central Government levies excise duty under the Central mint Act, 1944 and the Central Excise Tariff Act, 1985.Central excise duty is tax which is charged on su ch excisable goods that are manufactured in India and are meant for domestic consumption. The term excisable goods means the goods which are specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act 1985. It is authorisation to pay Central Excise duty payable on the goods manufactured, unless exempted eg duty is not payable on the goods exported out of India. Further various other exemptions are also notified by the Government from the payment of duty by the manufacturers.Various Central Excise are (1) Basis Excise Duty Excise Duty, imposed under section 3 of the Central Excises and Salt Act of 1944 on all excisable goods other than common salt produced or manufactured in India, at the rates set forth in the schedule to the Central Excise tariff Act, 1985, falls under the category of Basic Excise Duty In India. (2) Special Excise Duty According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that come unde r taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944.Therefore, each year the Finance Act spells out that whether the Special Excise Duty shall or shall not be charged, and eventually collected during the relevant financial year. (2) Additional Duty of Excise Section 3 of the Additional Duties of Excise Act of 1957 permits the charge and collection of excise duty in respect of the goods as listed in the Schedule of this Act. (4) Road Cess (a) Additional Duty of Excise on Motor Spirit This is leviable by the Finance Act (No. 2), 1998. (b) Additional Duty of Excise on High Speed Diesel Oil This is leviable by the Finance Act, 1999. 5) Surcharge (a) Special Additional Duty of Excise on Motor Spirit This is leviable by the Finance Act, 2002. (b) Surcharge on Pan Masala and Tobacco Products This Additional Duty of Excise has been imposed on cigarettes, pan masala and certain specified tobacco products, at specified rates in the Budget 2005-06. Bir is are not subjected to this levy. (6) National Calamity Contingent Duty (NCCD) NCCD was levied on pan masala and certain specified tobacco products vide the Finance Act, 2001.The Finance Act, 2003 extended this levy to polyester filament yarn, motor car, two wheeler and multi-utility vehicle and crude petroleum oil. (7) Education Cess Education Cess is leviable 2% on the aggregate of duties of Excise and Secondary and Higher Education Cess is Leviable 1% on the aggregate of duties of Excise. (8) Cess A cess has been imposed on certain products. assistance Tax The service providers in India except those in the state of Jammu and Kashmir are required to pay a Service Tax under the provisions of the Finance Act of 1994. The provisions related to Service Tax came into effect on 1st July, 1994.Under Section 67 of this Act, the Service Tax is levied on the gross or aggregate amount charged by the service provider on the receiver. However, in terms of Rule 6 of Service Tax Rules, 1994, the tax is permitted to be paid on the value received. The interesting thing about Service Tax in India is that the Government depends heavily on the uncoerced compliance of the service providers for collecting Service Tax in India. Sales Tax Sales Tax in India is a form of tax that is imposed by the Government on the sale or purchase of a particular commodity within the country.Sales Tax is imposed under both, Central Government (Central Sales Tax) and suppose Government (Sales Tax) Legislation. Generally, each State follows its own Sales Tax Act and levies tax at various rates. Apart from sales tax, certain States also imposes additional charges like flora contracts tax, turnover tax and purchaser tax. Thus, Sales Tax Acts as a major revenue-generator for the various State Governments. From 10th April, 2005, most of the States in India have supplemented sales tax with a new Value Added Tax (VAT).