Ever since I started working full time & earning at age of 23 years, I have started complaining to my father see how much I paid in taxes, my father always use to say “if you have started paying taxes its good thing that you earned an income.”
How many of you actually love to pay tax & how many of you know that government ask us to pay tax via 25 different manners? In this article I will provide you brief information about these 25 taxes in India.
Also Read – 20 Tax Free Incomes in India
Tax is imposing financial charges on individual or company by central government or state government. Collected Tax amount is used for building nation (infrastructure & other development), to increase arms and ammunition for defense of country and for other welfare related work. That’s why it is said that “Taxes are paid nation are made”.
Type of Taxes in India:-
These types of taxes are directly imposed & paid to Government of India. There has been a steady rise in the net Direct Tax collections in India over the years, which is healthy signal. Direct taxes, which are imposed by the Government of India, are:
(1) Income Tax:-
Income tax, this tax is mostly known to everyone. Every individual whose total income exceeds taxable limit has to pay income tax based on prevailing rates applicable time to time.
By doing investment in certain scheme you can save Income Tax.
Also Read:- 5 Best Tax Saving Options
For FY 2019-20 Income tax rates / Income Tax Slabs are:-
(2) Capital Gains Tax:-
Capital Gain tax as name suggests it is tax on gain in capital. If you sale property, shares, bonds & precious material etc. and earn profit on it within predefined time frame you are supposed to pay capital gain tax. The capital gain is the difference between the money received from selling the asset and the price paid for it.
Capital gain tax is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is charged if the capital assets are kept for more than certain period 1 year in case of share and 3 years in case of property. Short-term Capital Gains Tax is applicable if these assets are held for less than the above-mentioned period.
Rate at which this tax is applied varies based on investment class.
If you purchase share at say 1000 Rs/- (per share) and after two months this price increased to 1200 Rs/-(per share) you decide to sale this stock and earn profit of 200 Rs/- per share. If you do so you have to pay Short term CGT (capital gain tax) @ 10% +Education cess on profit as it is short term capital gain. If you hold same share for 1 year or above it is considered as long term capital gain and you need not to pay capital gain tax.it is considered as tax free.
Similarly if you purchase property after two year if you find that property price in which you invested has increased and you decide to sale it you need to pay short term capital gain tax.
For property it is considered as long term capital gain if you hold property for 3 years or above.
(3) Securities Transaction Tax:-
A lot of people do not declare their profit and avoid paying capital gain tax, as government can only tax those profits, which have been declared by people. To fight with this situation Government has introduced STT (Securities Transaction Tax ) which is applicable on every transaction done at stock exchange. That means if you buy or sell equity shares, derivative instruments, equity oriented Mutual Funds this tax is applicable.
This tax is added to the price of security during the transaction itself, hence you cannot avoid (save) it. As this tax amount is very low people do not notice it much.
Current STT Rates are:-
(4) Perquisite Tax:-
Earlier to Perquisite Tax we had tax called FBT (Fringe Benefit Tax) which was abolished in 2009, this tax is on benefit given by employer to employee. E.g If your company provides you non-monetary benefits like car with driver, club membership, ESOP etc. All this benefit is taxable under perquisite Tax.
In case of ESOP The employee will have to pay tax on the difference between the Fair Market Value (FMV) of the shares on the date of exercise and the price paid by him/her.
(5) Corporate Tax:-
Corporate Taxes are annual taxes payable on the income of a corporate operating in India. For the purpose of taxation companies in India are broadly classified into domestic companies and foreign companies.
In addition to above other taxes are also applicable on corporates.
(6) Sales Tax :-
Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by Union Government, while sales tax on intra-State sale (sale within State) (now termed as VAT) is charged by State Government.
Sales can be broadly classified in three categories. (a) Inter-State Sale (b) Sale during import/export (c) Intra-State (i.e. within the State) sale. State Government can impose sales tax only on sale within the State.
CST is payable on inter-State sales is @ 2%, if C form is obtained. Even if CST is charged by Union Government, the revenue goes to State Government. State from which movement of goods commences gets revenue. CST Act is administered by State Government.
(7) Service Tax:-
Most of the paid services you take you have to pay service tax on those services. This tax is called service tax. Over the past few years, service tax been expanded to cover new services.
Few of the major service which comes under vicinity of service tax are telephone, tour operator, architect, interior decorator, advertising, beauty parlor, health center, banking and financial service, event management, maintenance service, consultancy service
Current rate of interest on service tax is 14.5%. This tax is passed on to us by service provider.
(8) Value Added Tax:-
The Sales Tax is the most important source of revenue of the state governments; every state has their respective Sales Tax Act. The tax rates are also different for respective states.
Tax imposed by Central government on sale of goods is called as Sales tax same is called as Value added tax by state government.VAT is additional to the price of goods and passed on to us as buyer (end user). Around 220+ Items are covered with VAT.VAT rates vary based on nature of item and state.
Government is planning to merge service tax and sales tax in form of Goods service tax (GST).
Also Read:- Download new 15G/15H Forms
(9) Custom duty & Octroi (On Goods):-
Custom Duty is a type of indirect tax charged on goods imported into India. One has to pay this duty , on goods that are imported from a foreign country into India. This duty is often payable at the port of entry (like the airport). This duty rate varies based on nature of items.
Octroi is tax applicable on goods entering in to municipality or any other jurisdiction for use, consumption or sale. In simple terms one can call it as Entry Tax.
(10) Excise Duty:-
An excise or excise duty is a type of tax charged on goods produced within the country. This is opposite to custom duty which is charged on bringing goods from outside of country. Another name of this tax is CENVAT (Central Value Added Tax).
If you are producer / manufacturer of goods or you hire labor to manufacture goods you are liable to pay excise duty.
(11) Anti Dumping Duty:-
Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. In order to rectify this situation Central Govt. imposes an anti dumping duty not exceeding the margin of dumping in relation to such goods.
(12) Professional Tax :-
If you are earning professional you need to pay professional tax. Professional tax is imposed by respective Municipal Corporations. Most of the States in India charge this tax.
This tax is paid by every employee working in Private organizations. The tax is deducted by the Employer every month and remitted to the Municipal Corporation and it is mandatory like income tax.
The rate on which this tax is applicable is not same in all states.
(13) Dividend distribution Tax:-
Dividend distribution tax is the tax imposed by the Indian Government on companies according to the dividend paid to a company’s investors. Dividend amount to investor is tax free. At present dividend distribution tax is 15%.
(14) Municipal Tax:-
Municipal Corporation in every city imposed tax in terms of property tax. Owner of every property has to pay this tax. This tax rate varies in every city.
(15) Entertainment Tax:-
Tax is also applicable on Entertainment; this tax is imposed by state government on every financial transaction that is related to entertainment such as movie tickets, major commercial shows exhibition, broadcasting service, DTH service and cable service.
(16) Stamp Duty, Registration Fees, Transfer Tax:-
If you decide to purchase property than in addition to cost paid to seller. You must consider additional cost to transfer that property on your name.
That cost include registration fees, stamp duty and transfer tax. This is required for preparing legal document of property.
In simple sense this tax is imposed on the handing over of the title of property ownership by one person to another. It incorporates a legal transaction fee & stamp duty. This amount varies from property to property based on cost.
(17) Education Cess , Surcharge:-
Education cess is deducted and used for Education of poor people in INDIA. All taxes in India are subject to an education cess, which is 3% of the total tax payable. The education cess is mainly applicable on Income tax, excise duty and service tax.
Surcharge is an extra tax or fees that added to your existing tax calculation. This tax is applied on tax amount.
(18) Gift Tax:-
If you receive gift from someone it is clubbed with your income and you need to pay tax on it. This tax is called as gift tax. Gift tax is not applicable if Gift is received from relatives.
This tax is applicable if gift amount or value is more than 50000 Rs/- in a year.
(19) Wealth Tax:-
Wealth tax is a direct tax, which is charged on the net wealth of the assessee. Wealth tax is chargeable in respect of Net wealth corresponding to Valuation date.Net wealth means all assets less loans taken to acquire those assets. Wealth tax is 1% on net wealth exceeding 30 Lakhs (Rs 3,000,000). So if you have more money, assets you are liable to pay tax.
Note:- Wealth tax is abolished by government in budget 2015.Now onwards surcharge of 12% is applicable on individual earning 1 crore and above.
(20) Toll Tax:-
At some of places you need to pay tax in order to use infrastructure (road, bridge etc.) build from your money given to government as Tax. This tax is called as toll tax. This tax amount is very small amount but, to be paid for maintenance work and good up keeping.
(21) Swachh Bharat Cess:-
Swacch Bharat Cess is recently being imposed by the government of India. This tax is applicable on all taxable services from 15thNovemeber, 2015. The effective rate of Swachh Bharat Cess is 0.5%. After this tax we need to pay 14.5% service tax.
(22) Krishi Kalyan Cess:-
In budget 2016 finance minister has introduced new tax namely Krishi Kalyan Cess. This cess is introduced in order to extend welfare to the farmers. The effective rate of Krishi Kalyan Cess is 0.5%. This tax will be imposed on all taxable services. Krishi Kalyan Cess would come in force with effect from June, 1, 2016. Once this cess is applied we need to pay service tax @ 15%.
(23) Dividend Tax:-
In budget 2016 finance minister has introduced a new tax on the dividend amount. It is proposed that 10% additional tax will be imposed on dividend income above 10 Lac from 1st April 2016 onwards.
(24) Infrastructure Cess:-
New Infrastructure cess on car and utility vehicle imposed recently in budget 2016. 1% infrastructure cess is applicable on petrol/LPG/CNG-driven motor vehicles of length not exceeding 4 meters and engine capacity not exceeding 1200cc. 2.5% cess on diesel motor vehicles of length not exceeding 4 meters and engine capacity not exceeding 1500cc and 4% cess is applicable on big sedans and SUVs.
(25) Entry Tax:-
This entry tax is imposed by Gujarat, Madhya Pradesh, Assam, Delhi and Uttarakhand state government recently. The tax rate is variable 5.5-10% depending upon the state. All items entering in the state boundaries ordered via E-commerce are under this tax boundary.
By Introduction of GST on 1st July,2017 all indirect taxes are subsumed in GST. Total 15 different taxes are abolished by introduction of single tax GST (Goods and Service Tax). Taxes removed by introduction of GST are Central Excise Duty, Service Tax, Value Added Tax,Countervailing duty,Custom Duty, Entertainment Tax,Luxury Tax,Lottery Tax,State Surcharge, Sales Tax, Antidumping duty, Swacch Bharat Cess, Krishi Kalyan Cess,Infrastrcutre Cess & Education Cess.
LTCG tax on the stock market and mutual fund investment in reintroduced in budget 2018. As per new rule any person who sells shares after April 1, 2018, will pay a long-term capital gains tax at the rate of 10 percent on gains of more than Rs 1 lakh. For such shares, the cost of acquisition will be price as on Jan. 31, 2018. If a person who has held shares for more than one year sells them before March 31, 2018, there will be no long-term capital gains tax.
No changes are made in short-term capital gain tax. Short-term capital gain would be taxed @15%.
So, total number of tax in India is reduced from 27 to 12.
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