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1. Introduction
2. Classification of Taxes
2.1. Direct Tax
2.2. Indirect Tax
3. Methods of Taxation
3.1. Progressive Taxation
3.2. Regressive Taxation
3.3. Proportional Taxation
4. Tax Reforms
4.1. Direct Tax Code
4.2. Vivaad se Vishwas Scheme (VSV)
4.3. Goods and Services Tax (GST).
5. Tax Evasion
5.1. Transfer Pricing
5.2. Tax Havens
5.3. Base Erosion and Profit shifting (BEPS).
5.4. General Anti Avoidance Rules (GAAR)
5.5. Double Taxation Avoidance Agreement (DTAA)
5.6. Advance Pricing Agreements
5.7. Global Minimum Corporate Tax (GMCT)
6. Tax Related Terms
6.1. Tobin Tax
6.2. Pigouvian Tax
6.3. Tax Expenditure
6.4. Some Other Terms
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Taxation
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Indian Economy
Introduction
Taxation refers to levy on individuals or companies by the governments in practically every country throughout the world. Taxation is usually used to collect income for government expenses, but it can also be used for other purposes. The tax is compulsory and, unlike other payments, is not related to any specific services delivered or to be offered in the future. Physical assets, such as property and transactions, such as the selling of stock or a home, are subject to tax. Income, corporate, capital gains, property, and sales taxes are all examples of taxes.
- Tax is a mandatory contribution to state revenue that the Indian government levies on worker income and corporate gains, as well as added to the cost of certain transactions, commodities, and services.
- The government collects taxes on citizens to generate revenue for business ventures that would improve the country’s economy and raise citizens’ living standards.
- In our country, the government’s right to levy taxes is derived from the Indian Constitution, which grants the State and Central governments equal jurisdiction to impose taxes.
- Every tax imposed within the country must be accompanied by an accompaniment law passed by the State Legislature or the Parliament.
Classification of Taxes
Taxes are broadly classified into two types:
- Direct Taxes
- Indirect Taxes
Direct Tax
- A direct tax is one that is levied directly on the taxpayer and paid directly to the government by those who are subjected to it.
- The Central Board of Direct Taxes is responsible for levying and collecting direct taxes as well as formulating other direct tax policies.
- A taxpayer pays a government a direct tax for a variety of reasons, such as real property tax, personal property tax, income tax or asset taxes, Gift Tax, Capital Gains Tax, and so on.
- Direct Tax is one of the two main sources of revenue for the government. The indirect tax is the other.
- Every fiscal year, direct taxes account for roughly half of the government’s revenue.
- To increase revenue, the government sets direct tax collection targets for each fiscal year.
Indirect Tax
- An indirect tax is a tax that is collected through a middleman from the person who suffers the tax’s ultimate economic burden.
- It is possible for the taxpayer to transfer it to someone else.
- The intermediary prepares a tax return and sends the tax proceeds to the government along with it.
- In this sense, an indirect tax differs from a direct tax, which is collected directly by the government from the individuals (legal or natural) who are subjected to it.
- Indirect taxes are based on an individual’s expenses rather than their income.
- Indirect taxes are levied on suppliers of goods and services, but the tax is passed on to the consumers, who are indirectly paying the tax.
- Examples of indirect taxes include GST, customs duties, sales tax, excise duty, service tax etc.