The taxpayers behind the curtains- Direct and indirect taxation

Direct Tax

The tax levied on a person’s income and wealth which is paid directly to the government is known as a direct tax.

The tax is progressive in nature i.e. it increases with an increase in the income or wealth and vice versa. It is levied according to the paying capacity of a particular person, that is, the amount of tax collected from the rich people is lesser compared to the amount of tax collected from the poor people.

There are several types of Direct Taxes, such as:

·         Income Tax

·         Wealth Tax

·         Property Tax

·         Corporate Tax

·         Import and Export Duties

Indirect Tax

Indirect Tax can be described as tax charged on a person or persons who consume services and goods and is paid indirectly to the government. There are several types of Indirect Taxes, such as:

·         Central Sales Tax

·         VAT (Value Added Tax)

·         Service Tax

·         STT (Security Transaction Tax)

·         Excise Duty

·         Custom Duty

Income Tax

Taxable income refers to total income minus applicable deductions and exemptions. If the taxable amount is above the minimum taxable limit, then tax is payable and is paid as per the different rates that have been announced for each tax slab for that particular financial year.

Corporation Tax

Corporation Tax is paid by companies and businesses on the income earned worldwide in a given financial year.

Wealth Tax

It is taxed at the rate of 1% of the net wealth.

Capital Gains Tax

Capital Gains Tax is usually taxed at two different rates based upon how long the property was owned by the taxpayer. Evidently, Capital Gains Tax is of two types-

·        Short Term Capital Gains Tax

·        Long-Term Capital Gains Tax

Indirect Taxes-

Sales Tax

This kind of tax is charged for the movable goods.

Service Tax

Service tax is applicable to all services provided in India except a specified negative list of services that are exempt. The service provider pays it to the government who in turn collects it from the end user by the provider at the time of provision of the said service.

Mahaveer Singhvi & Associates is a Chartered Accountant's firm. They provide extensive professional services in the areas of Advisory Services, Auditing, Taxation, and Management & Consultancy Services. Find more about them here at http://www.ca-msa.com/