Purpose of Taxation

The main purpose of taxation is to accumulate funds for the functioning of the government machineries. No government in the world can run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning.

In other words, a government can run its administrative set up only through public funding which is collected in the form of tax. Therefore, it can be well understood that the purpose of taxation is very simple and obvious for proper functioning of a state. Taxes are charges levied against a citizen's personal income or on property or for some specified activity.

Further, the other important purposes of taxation are as follows -

Increase in effectiveness and productivity of the nation
Increase in the quantum of revenue collection
Improvement in services of the government
Improve employment at all industry verticals
Induction of modern technology in to the system
Rationalization of terms and condition of the economic system
Rationalization of employment terms and conditions

There are basically two types of taxes, like -

Direct tax
Indirect tax

Further, it is sub-divide into major groups like -

Income tax
Wealth tax
Gift tax
Expenditure tax
Interest tax

The present day tax structure of India finds its root in the first draft of Indian taxation system, which was incorporated in 1922. The first draft was amended a number of time according to the economic policy requirements. The main acts and rules that governs the main purpose of taxation in India is the income tax acts and rules, which are as follows -

Acts

Finance Act, 2007- An Act to give effect to the financial proposals of the Central Government for the financial year 2007-2008
National Tax Tribunal (Amendment) Act, 2007 - An Act to amend the National Tax Tribunal Act, 2005
Taxation Laws (Amendment) Act, 2006 - An Act further to amend the Income-tax Act, 1961, the Customs Act, 1962, the Customs Tariff Act, 1975 and the Central Excise Act, 1944
Finance Act, 2006 - An Act to give effect to the financial proposals of the Central Government for the financial year 2006-2007
Taxation Laws (Amendment) Act, 2005 - An Act further to amend the Income-tax Act, 1961 and the Finance Act, 2005
National Tax Tribunal Act, 2005 - An Act to provide for the adjudication by the National Tax Tribunal of disputes with respect to levy, assessment, collection and enforcement of direct taxes and also to provide for the adjudication by that Tribunal of disputes with respect to the determination of the rates of duties of customs and central excise on goods and the valuation of goods for the purposes of assessment of such duties as well as in matters relating to levy of tax on service, in pursuance of article 323B of the Constitution and for matters connected therewith or incidental thereto
Finance Act, 2005 - An Act to give effect to the financial proposals of the Central Government for the financial year 2005-2006
Maharashtra Fiscal Responsibility and Budgetary Management Act, 2005- An Act to provide for the responsibility of the State Government to ensure inter-generational equity in fiscal management, fiscal stability
Finance (No. 2) Act, 2004- The following Act of Parliament received the assent of the President on the 10th September, 2004, and is hereby published for general information:- An Act to give effect to the financial proposals of the Central Government for the financial year 2004-2005
Finance Act, 2004- An Act to continue for the financial year 2004-05 the existing rates of income-tax and the levy of the National Calamity Contingent Duty and the National Calamity Contingent Duty of Customs on certain items

Taxation rules in India:

Income-tax (Fourteenth Amendment) Rules, 2007- In exercise of the powers conferred by section 295 read with sub-section (2) of section 17 of the Income-tax Act, 1961 (43 of 1961)
Income-tax (Thirteenth Amendment) Rules, 2007
Income-tax (Twelfth Amendment) Rules, 2007
Income-tax (Eleventh Amendment) Rules, 2007
Income-tax (Ninth Amendment) Rules, 2007
Income-tax Welfare Fund Rules, 2007
Wealth-tax (First Amendment) Rules, 2007
Post Office (Monthly Income Accounts) (Amendment) Rules, 2007
Directorate of Income-tax (Systems), Joint Director (Systems), Deputy Director (Systems) and Assistant Director (Systems) Recruitment (Amendment) Rules, 2007
Income-tax (Eighth Amendment) Rules, 2007