Taxation in India

India's tax collection structure is nicely divided along with the central government, state governments and local bodies are responsible for it. The union governments collect income tax, central excise and service tax even though the state governments levy taxes on land revenue, VAT, stamp duty etc. The local bodies are responsible for water tax, octroi and a lot of other taxes.

There are 3 broad classification of taxes, namely, ad valorem and particular taxes, indirect and direct taxes and progressive and regressive taxes. An ad valorem tax means the tax is imposed on the basis of total value of the commodity whereas the specific tax is the tax imposed on the basis of weight, quantities, size, breadth and width.

Direct tax is imposed on a person and its burden isn't shifted to yet another and borne by the individual himself example income tax, corporate tax. Indirect taxes are imposed on somebody but whose burden could be shifted to a person else example excise duty, sales tax and customs duty.

A Progressive tax can be a tax under which as income goes up, the rate of tax will go up so as those earning higher income ends up paying much more. A proportional tax is a tax under which whatever be the income level, the rate of tax remains the very same so that differences between greater income and lower income is exact same just before tax as it is soon after tax.

Every citizen must follow proper tax planning practices. This indicates that he need to pay his taxes also as makes correct investment and pick proper tax saving instruments. The tax that is to be paid is deduced on the income earned plus the kind of investment made. There are numerous tax exemptions investment, which is produced on the basis on source of income. The investors must have correct tax planning to avail these advantages.

The income tax might be calculated with the assist of income tax calculator. It calculate the taxable income by combining the income on the basis of salary, allowances and incentives, capital gains and other sources of income. For the fiscal year 2007-08, income up to Rs 1, 10,000 per annum is exempted from such tax. For the income above this amount, you can find different slabs. The further charge of 10 per cent is levied if the income crosses Rs 8, 50,000. The education cess of 2 per cent is added along with this charge.

In India, the amount of indirect taxes was really high compared to the direct taxes. In 1991, prior to tax reform, just 19 per cent of the taxes came from direct tax whilst the percentage was 81 per cent from the indirect taxes.

The truth that in a country indirect taxes are predominant against direct taxes suggest that burden of taxation falls more heavily on the poor people because indirect taxes are taxes on commodities.
But soon after tax reform based on Chelliah and Kelkar committee recommendation, several of these characteristics have been addressed to make the tax structure straightforward, broad based, decrease the multiplicities of taxes, reduce complexities of taxes as well as plug evasion.