India Revenue Facts – What is Taxation?

A tax is any monetary charge or any sort of levied levy imposed on a person by a government agency so as to fund various public expenses and government expenditure. A tax evasion or refusal to pay is punishable by criminal law. All people in the world are subject to taxation at one point of time or the other during their lifetimes. Almost all countries levy taxes either directly or indirectly through sales, income, production, consumption or licensing. There are numerous indirect kinds of taxes, such as estate and gift taxes, property taxes, sales tax, value-added tax (VAT), and property rent tax.

Many countries have different kinds of taxation system based on wealth or income level of a person. These taxes are termed as regressive or proportional taxes. In a regressive tax system, the rate of tax increases as income decreases. The opposite is true for proportional taxes, where there is a progressive rate of tax on increase in income and taxes are levied on escalating levels.

There are several ways in which a tax can be levied in the modern world. Among them are personal and corporate taxes. In India, both types of taxation are administered through the federal government. The federal government collects dues from the Indian residents for the supply of services such as air, rail, postal, electricity, etc.

Several states in India have separate systems. In such cases, taxes are levied on the basis of the individual’s annual income. A higher earning individual has to pay a higher rate of tax. Taxation on individuals also depends on the basis of their place of residence. A taxpayer residing in an area prone to natural disaster will be charged with higher annual income tax.

Corporate taxes in India are different from the usual system of territorial taxation. Under the system of territorial taxation, all the income earned by an organization was subjected to state taxes. But this was replaced by the system of service tax in India. Service tax is levied according to the number of days that the company has been in operation in the country.

Now let us move towards our discussion about indirect taxes in India. These are basically taxes on sales of products and services done in the country. It includes various other taxes like customs duty, central Excise, centralizes administrative charges, income tax and property tax. All these indirect taxes amount to about 25% of your total income.