What is Taxation?
It is a process where the government collects monetary contributions from individuals, businesses and entities for the overall benefit of the nation. It is a fundamental aspect that plays a crucial role in the economic development of any nation. India, along with many other countries follows the taxation system. Tax can also be understood as a mandatory fee collected by the government from the eligible citizens to provide all the citizens the best public facilities.
Taxation is a process carried out by the central and state governments in a transparent and streamlined manner. In India, GST (Goods and services tax) was introduced to streamline the entire taxation process and promote equality.
Types of Taxes
In India, the income tax is divided into 2 types:
#1. Direct Taxes: These taxes are imposed on the individual, business or entities directly and are submitted to the government such as
- Income Tax – Imposed on individuals’ earnings and businesses’ profits. It includes personal income tax, corporate tax, and capital gains tax.
- Property Tax – Levied on the value of real estate property owned by individuals or businesses.
#2. Indirect Taxes: This tax is not applicable on the income generated or the profit earned. Indirect tax is imposed on the goods and services, whenever bought or sold. This can be transferred from one person to another. For example
- GST – Being introduced in 2017, GST is a tax imposed on goods and services and since is a part of the indirect taxes.
- Value – Added Tax (VAT): Applied to the value added at each level of the production cycle or distribution of goods and services. VAT is added in the sum total amount paid by a customer for a particular good or service.
- Sales Tax – Charged on the sale of goods and services, usually a percentage of the sale price.
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