One of the most important taxation systems implemented in India is the Direct Tax. A direct tax is a tax that is levied directly, rather than indirectly. The individual or organisation that is liable to pay the tax directly pays the amount to the government or state. In such cases, the incidence of taxation cannot be shifted to anyone else.
There are many different types of direct tax, some of them are explained down below:
1. Income tax
Income Tax is paid by individuals and companies that earn taxable income. The levels of income at which tax is deducted depend on majorly two factors: the slab rate and the type of income – Salaried/business income. For instance, the TDS on consultant would be different from that of an assistant consultant. Visit this website for more info. The Income Tax Department also gives out flat rate deductions from taxable income which may be availed. To calculate the exact tax amount people must file Income Tax Returns (ITR) yearly. If people don’t follow these procedures huge penalties are levied for not filing ITR on time.
2. Wealth tax
You can avoid paying wealth tax on your gold deposit bonds, stock holdings, the commercial property you rent out, and house property you use for your business if you meet certain conditions. Some conditions for exemption from the tax include using assets for business or professional purposes, renting them for more than 300 days.
3. Estate tax
Many things go in a will. It contains anything and everything about the person after his death. But one of the most important things which everyone should know is the money payable on their death. He/she has to pay a tax based on real estate, cash, any property and other valuable possessions. This type of tax is also known as inheritance tax.
4. Capital gains tax
Capital gains tax is a type of tax that you pay on the profits you make from selling assets or investments, including property and stocks. Capital assets and investments include things like art, bonds, farms, businesses, shares and homes. A capital gains tax can be subdivided into long term or short term based on the holding period of the asset. Short term gains include the investments on assets that are sold in less than 36 months from acquisition. This is true for all types of investments except for the investment made into securities. On the other hand, long term tax is applied on the income that is generated from the property that is sold after 36 months of acquisition.
5. Corporate tax
As a beneficial owner of a domestic company, you will be responsible for paying corporate tax on your company’s profits. If you are a foreign corporation and have earned income in India, you will also be required to pay corporate tax.
As per income tax laws, the money that you make from sales, technical service fees, dividends, royalties or interests that have originated in India are taxable as income.