“Taxes are paid, and nations are made” is a perfect saying that explains the significance of paying taxes.
Tax is a fee imposed by the government on a product, service, venture, and income. It is obligatory, and you cannot avoid it. It works as a catalyst to promote the economic growth of the nation. The Indian Constitution has given authority to the government to manage taxes. This article is a complete guide to tax, the type of taxes, and its benefits.
Types of tax
There are two major taxes in India, Direct Tax, and Indirect Tax.
Direct Taxes are those taxes that you pay to the government. This is your responsibility to pay tax at a given time, and no other entity or person is liable to pay your tax.
There are many types of Direct Taxes, which includes:
Income Tax comes under the Income Tax Act of 1961. This tax is applicable to any income you produce for profits, keeping a property, investments, salary, or business.
If you receive any types of gifts, you are liable to pay a tax of 30%, excluding gifts from families such as spouses and blood relatives. If anyone else presents a gift whose value surpasses Rs. 50000, then you will be liable to pay tax.
This is the tax given by companies. Just like income tax, there are various tax slabs for corporate tax also.
The corporate tax also has a few categories like-
- Minimum Alternative Tax
- Dividend Distribution Tax
- Fringe Benefit Tax
Capital gains tax
When you earn any profit from selling any property or spend money on an investment, you have to pay capital gain tax.
Securities Transaction Tax
The government applies this tax on those who deal in Shares on the stock market. For any share, you buy or sell; you need to pay the Securities Transaction Tax.
Indirect taxes are the ones that you do not give to the government. It applies to those who use various goods and services. The seller collects the amount of tax from the customer as the tax is already included in the price of the product. Seller pays it to the government.
The only indirect tax in India is-
- Goods and services tax (GST)
GST came into the picture in 2017 to replace all indirect taxes for the convenience of the people. It is a type of consumption tax, added at every step of the production sequence.
Other Tax in India
Apart from the direct and indirect taxes mentioned above, there are a few other taxes available in India. Some of them are-
- Property Tax
- Professional Tax
- Entertainment Tax
- Toll Tax
- Education Cess.
- Road Tax
Advantages of Paying Taxes
- Visa Application:
Many of the foreign embassies will ask you to provide your tax records to get visa approval. This assists them that you are not leaving the country due to failure in paying taxes.
- Loan Approvals:
To get a loan, you need to give your ITR file for the last 2-3 years to the bank. Paying your taxes makes you qualified for a loan and also allows you to get a higher amount.
- Life Insurance coverage:
if you have proper ITR documents, You can get the benefit of life insurance policies covering compensation of 50 lakhs to Rs. 1 crore. It assists Insurance agents to verify your annual income.
Benefits of tax to government:
- Taxes provide funding for public infrastructure.
- Helps in Defense expenditure.
- Helps in Scientific research.
- Provides Public insurance.
- Provide Salaries to government servants.
- Helps in developing Public transport.
Paying taxes help the nation to grow. Rather than thinking it a burden, taxpayers should treat it as a national duty. This will help the government to improve the quality of the lives of the citizens in the country.