Taxes in India
Taxes are imposed on their residents by government to produce revenue for implementing programs to improve the country’s economy and to increase the living standards of its citizens. The government’s authority to levy taxes in India is obtained from the Constitution of India, which grants the central and state governments the right to levy taxes. An underlying legislation enacted by Parliament or the State Legislature shall endorse all taxes levied throughout India.
What are the taxes
Two main types of tax are direct and indirect. The distinction lies in the way these taxes are put into effect. Tax such as such as the dreaded income tax, wealth tax, corporate tax etc., are paid directly by taxpayer, and indirect taxes are such as value added tax, utility tax, sales tax, etc.
However, in addition to these two traditional taxes, there are also other taxes that have been introduced to fulfill a clear agenda by the Central Government.
For both direct and indirect taxes, such as the newly imposed Swachh Bharat Cess tax, Krishi Kalyan Cess tax, and infrastructure Cess tax, among others, ‘other taxes are levied.
Tax rates
| Tax | Tax Rate |
|---|---|
| GST | 0% – 28% |
| Corporate income tax | 15% – 50% |
| Personal income tax | 5% – 30% |
| Dividend tax | 10% – 30% based on income slab; 20% for non-residents |
| Capital Gains tax | 12.5% – 15% |
| Property tax | Varies by local authority and property value; generally 0.1% – 0.3% of the property value |
| Inheritance tax | 0% |
| International tax | 10% – 40% (depending on income type and applicable treaties) |
| Cryptocurrency tax | 1% – 30% |
Tax system
Income Tax Slabs: In India, income tax is levied on individual taxpayers on the basis of a slab system where different tax rates have been prescribed for different slabs and such tax rates keep increasing with an increase in the income slab.
Existing tax regime
Individual taxpayers have three categories:
- Individuals (under 60 years of age), including both residents and non-residents,
- Senior citizens resident (60 years and above but below the age of 80 years)
- Super senior citizens in residence (above 80 years of age)
Direct tax
Direct tax is one that is assessed on an individual (legal or natural) or property (i.e. real and personal property, livestock, crops, salaries, etc.) as distinct from the transaction tax.
Indirect tax
An indirect tax is a tax imposed by an agent (such as a retail store) on a person who carries the ultimate economic tax burden (such as the consumer). Subsequently, the intermediary issues a tax return and returns the tax proceeds to the nation.
Net income
In any of the aforementioned groups, net income is calculated on all total earnings earned over the fiscal year and decreased by revenue-related expenditures for the same time. Losses from one of the seven types of basic income (except capital investment) should be entirely compensated against positive income from another category of income (exceptions which apply to other income').
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Disclaimer
Tax laws and regulations are frequently updated and can differ depending on personal circumstances. The information presented here is intended for general guidance and may not represent the latest changes. It is strongly advised to seek the assistance of a qualified tax professional for specific and current advice tailored to your situation.