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August 07, 2014

Tax Structure in India

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Tax is a compulsory payment by the citizens to the government to meet the public expenditure. It is legally imposed by the government on the taxpayer and in no case taxpayer can deny to pay taxes to the government. 

Direct Tax
  • A direct tax is that tax, which is born by the person on whom it is levied. A direct tax cannot be shifted to other person. 
Indirect Tax
  • These are those taxes, which have their primary burden or impact on one person. But that person succeeds in shifting his burden on to others.
  • Indirect taxation is policy often used to generate tax revenue. Indirect tax is so called as it is paid indirectly by the final consumer of goods and services while paying for purchase of goods or for enjoying services. 
Examples :

Direct Tax
Indirect Tax
Personal Income Tax
Excise Duty
Corporation Tax
Custom Duty
Wealth Tax
Sales Tax
Gift Tax
Service Tax
Land Revenue
Value Added Tax
Profession Tax
Passenger Tax
Stamp Duty and Registration Charges
Entertainment Tax
Securities Transaction Tax
Electricity Duty
Banking Cash Transaction Tax
Motor Vehicles Tax
 The Tax Structure in India
India has got quite developed and simplified tax structure. It contains 3 tiers, those are
  1. The Union Government
  2. The State Government
  3. The Rural and Urban Local Bodies or Municipal Jurisdictions
these three tiers are empowered with the imposition of the different duties and taxes, which are prevalent in the country. The Central Government is mainly responsible for levying Income Tax. However, they do not impose taxes on the income that is earned from agriculture. The agricultural income tax can be imposed by the government of a respective state.

Major Changes in Tax Structure in India
Since the year 1991, the Indian tax system has undergone some major changes. These changes were made in accordance with the country's W. T. O. commitments as well as the liberal financial policies. Some of the major changes in the structure of taxation in the nation are as follows:
  • Lowering the tax on corporate income
  • Reduction in the rate of excise duties as well as custom duties. Custom duty was reduced from the rate of 220 % in 1991 to 30 % in 2002.
  • Widening the base of tax
  • Toning up the administration of taxation
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