Service
Tax Consultants
Q:-What
is Tax? How many
types of tax?
The Tax revenue is the most
important source of public revenue. A tax is a compulsory payment levied by the
government on individuals or companies to meet the expenditure which is
required for public welfare.This tax is not applicable in the state of Jammu
& Kashmir.Taxes come in many avatars – income tax, sales tax, corporate
tax, service tax and so on. There are so many types of taxes that an average
Indian pays that often you pay a tax without even knowing that you’re paying
it!
Direct and Indirect Taxes
The most fundamental classification of
taxes is based on who
collects the
taxes from the tax payer.
Direct Taxes, as the name suggests, are taxes that are directly paid to the
government by the taxpayer.
It is a tax applied on individuals and organizations directly by the
government e.g. income tax, corporation tax, wealth tax etc.
Indirect Taxes are applied on the manufacture or sale
of goods and services. These are initially paid to the government by an
intermediary, who then adds the amount of the tax paid to the value of the
goods / services and passes on the total amount to the end user.
Examples of these are sales tax, service
tax, excise duty etc.
Important Direct and Indirect Taxes
Direct
Taxes
1. Income Tax
Income Tax is paid by an individual
based on his/her taxable income in a given financial year. Under the Income Tax
Act, the term ‘individual’ also includes Hindu Undivided Families (HUFs),
Co-operative Societies, Trusts and any artificial judicial person. Taxable
income refers to total income minus applicable deductions and exemptions.
Tax is payable if the taxable is above
the minimum taxable limit and is paid as per the differing rates announced for
each tax slab for the financial year.
2. Corporation Tax
Corporation Tax is paid by Companies and
Businesses operating in India on the income earned worldwide in a given
financial year. The rates of taxation vary based on whether the company is
incorporated in India or abroad.
3. Wealth Tax
Wealth tax is applicable on individuals,
HUFs or companies on the value of their assets in a given financial year on the
date of valuation. It is taxed at the rate of 1% of the net wealth of any
assesse exceeding Rs 30, 00,000.
‘Net wealth’ here includes, unproductive
assets like cash in hand above Rs 50,000, second residential property not
rented out, cars, gold jeweler or bullion, boats, yachts, aircrafts or urban
land. It does not include productive assets like commercial property, stocks,
bonds, fixed deposits, mutual funds etc.
4. Capital Gains Tax
The profits made on sale of property are
taxable under Capital Gains Tax. Property here includes stocks, bonds,
residential property, precious metals etc. It is taxed at two different rates
based on how long the property was owned by the taxpayer – Short Term Capital
Gains Tax and Long Term Capital Gains Tax. This deciding period of ownership
varies greatly for different classes of property.
Indirect Taxes
1. Sales Tax
Sales Tax is charged on the sale of movable
goods. It is collected by the Central Government in case of inter-state sales
(Central Sales Tax or CST) and by the State Government for intra-state sales
(Value Added Tax or VAT). The rates of taxation vary depending on the product
type.
2.
Service Tax
Service tax is a tax
levied by the government on service providers on certain service transactions,
but is actually borne by the customers. It is categorized under Indirect Tax
and came into existence under the Finance Act, 1994.It is charged to the
individual service providers on cash basis, and to companies on accrual basis.
This tax is payable only when the value of services provided in a financial
year is more than Rs 10 lakh.
3. Excise Duty
Excise duty is applicable on the manufacture
of goods sold in India. Once goods are manufactured, it is originally paid by
the manufacturer directly to the Central Government. When the goods change
hands from the manufacturer to the buyer, this tax is bundled by the manufacturer
along with the cost of goods and passed on to the buyer.
For the reason of audit
that the company owner will be fulfilled about the business operations and
working of its various departments. ARS Business Consulting is
working in Auditing Services, tax consultants in Gurgaon, service tax
consultants in Gurgaon from 6 years. For auditing related query dial
us our numbers at 098981800670 and
01244225457.
Kind regards,
ARS Business Consulting team,
Gurgaon, HR – India
