Taxation : Introduction
Tax is a sum of money which is mandatory for an individual to pay to a state or any body having an equivalency to a state. The individual / entity is termed as Taxpayer and the entire process is called Taxation. Taxation is a process of imposing financial charge (tax) on the citizens who earn 'taxable' income. A career in taxation challenges you to stay on the leading edge of tax issues. Taxation involves dealing with direct taxes, assessment of taxes, filing returns and providing advice on indirect taxes. While direct tax is the tax collected directly from the people in the way of income tax, property tax, wealth tax etc.; indirect tax is the tax collected from the customers on the goods purchased or for the service provided. For eg : VAT, sales tax, excise duty, customs duty etc.
India has a well developed taxation structure. The tax system in India is mainly a three tier system which is based between the Central, State Governments and an authority of a state, such as the Municipality, corporation or the Local Council. The main taxes/duties that the Central Government is empowered to levy are Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxes levied by the State Governments are Value Added Tax (VAT or Sales tax in States where VAT is not yet in force), Sales Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of certain goods), Land Revenue (levy on land used for agricultural/non-agricultural purposes), Duty on Entertainment and Tax on Professions & Callings. The Local Bodies are empowered to levy tax on properties (buildings, houses), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities like water supply, drainage, etc.
Taxation is the government's main source of revenue and several types of taxes are applied to different categories of the population. The tax paid by the citizens form its integral source of income. These funds are used in financing projects for developing the infrastructure and other development projects of the country. Whatever tax is being charged it has to be backed by the law passed by the legislature or the parliament. In India, Tax is regulated and administered by the Ministry of Finance under the Government of India. The main body which is responsible for the collection of taxes is the Central Board of Direct Taxes (CBDT) which is a part of the Department of Revenue. The CBDT functions as per the Central Board of Revenue Act of 1963.
The following is a brief description of some of the taxes that are levied in India by the government:
Income Tax (Personal)- The Income Tax Act of 1961 stipulates that any person who qualifies as an assessee and whose gross income is more than the exemption limit is required to pay Income Tax in accordance with the rates indicated by the Finance Act. Individuals whose income is below a specified mark need not pay any tax and such individuals are exempted.
Corporate Tax- India Corporate Tax is the tax charged on the profits earned by associations and companies by several jurisdictions. The rate of Corporate Tax in India depends on whether the profits have been passed on to the shareholders or not.
Property Tax - Tax charged on property owned by individuals or corporate.
Sales Tax - Tax on sale of goods
Value Added Tax- This is the tax that a manufacturer needs to pay while purchasing raw materials and a trader needs to pay while purchasing goods. VAT is eventually expected to replace Sales Tax. All goods and services provided by business individuals and companies come under the ambit of VAT.
Capital Gains Tax- A Capital Gain can be defined as an any income generated by selling a capital investment (business stocks, paintings, houses, family business, farmhouse etc.). The 'gain' here is the difference between the price originally paid for the investment and money received upon selling it, and is taxable.
Service Tax- As per the Finance Act of 1994, all service providers in India, except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India.
Fringe Benefit Tax- As per Section 115WB of the Finance Bill, expenses incurred for employees, by an employer (individual/company/local authority/trader) for purposes of entertainment, gifts, telephone, clubbing, festivals etc., will be treated as Fringe Benefits and will be taxed.
A career in Taxation invites you to be a progressive, innovative team member of a high-quality, professional organization. Tax consultants are generally people who are well aware of the different forms of taxes which are to be paid and use their knowledge in order to advice people or companies as to how to go about it. Providing suggestions and giving useful insights on how to handle the various aspects of dealing with taxes is a job of a tax consultant. Once you have done the taxation related courses and have some work experience in the field of taxation, then you can opt for a tax consultant's job profile. On the whole, the main aim of any tax consultant should be to make maximum use of all of his or her technical knowledge for the betterment of the client/company he is working.
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