The India government taxes form a major part of the taxation system in India. They are levied by the Central Government as per the Constitution of India. The constitution states that the government can levy taxes on organizations and individuals. It also mentions that no taxes can be levied unless authorized by law and must be backed by the parliament or the legislature.
The Central Board of Direct Taxes (CBDT) is the statutory body which manages the government taxation in India. It is under the Ministry of Finance and is a part of the Department of Revenue. The functions and operations of the CBDT are based on the Board of Revenue Act formulated in the year 1963.
There are a number of taxes that are levied under the India government taxes. There are direct taxes as well as indirect taxes. In order to have an idea of the various central taxes in India, we need to know the features of various taxes and duties.
Types of direct government taxes
Personal Income Tax: The Personal Income Tax is levied by the central government and is managed by the Central Board of Direct taxes according to the Income Tax Act. The various slabs of personal income tax are:
- 0-100,000- No tax to be paid
- 1, 00,000-1, 50,000- 10 %
- 1, 50,000-2, 50,000- 20 %
- 2,50,000 and more- 30 %
One also needs to pay an additional surcharge of 10 % if the income is more than Rs 8, 50,000.
In the recent budget some amendments have been made in case of the personal income tax. There has been an increase of Rs 10,000 in the threshold limit which will offer a tax relief of Rs 1000 to the assessee. In case of women, the threshold limit has been raised to Rs.145, 000 from Rs 135,000. For senior citizens, it has been raised from Rs.185, 000 to Rs 195,000 to provide a tax relief of Rs 2000. Tax deductions in case of medical insurance premiums have been increased to Rs 15,000. For senior citizens, it has been increased to Rs.20, 000.
Corporate Income taxes: The central government levies taxes on business organizations and companies on their transactions that are done worldwide. For non resident organizations, tax is charged on the business transactions with Indian sources. A tax of 35 % and an additional surcharge of 2.5 % are levied on the domestic organizations. For foreign business organizations, the basic tax rate is around 40 % with 2.5 % extra surcharge is charged. An education cess of 2 % is also charged. Extra wealth tax of 1 % is levied if the net profit exceeds $ 33333.
Capital Gains Tax: The central government levies taxes on the capital gains from the sale of assets. Long-term Capital Gains Tax is charged if the capital assets remain for three years and also if the securities and shares are a part of any recognized stock exchange in India.
Long term capital gains are taxed at 20 % while 10 % tax is charged on the short term capital gains.
Types of indirect government taxes
Customs Duty: The government formulated the Customs Duty under the Customs Act 1962 and Customs Tariff Act of 1975. Usually, the tax is levied on goods that are imported to the country. An additional educational cess is also charged. In case of industrial goods, the customs duty has been decreased to 15%.
Service Tax: In most cases, 10 % service tax is levied on different kinds of services in the country. There have also been some exemptions in the recent budget. The tax exemption limit has been raised from Rs.400, 000 to Rs.800, 000 for the small service providers. For the Resident Welfare Associations, a number of tax exemptions are offered.
Excise Duty: Excise duty is charged by the government of India under the Central Excise act of 1944 and the Central Excise Tariff Act of 1985. A basic tax of 16% excise duty is charged and extra excise duty of around 8 % is also charged in case of precious items. An educational cess of around 2 % is also charged along with the basic tax rates.
