About Tax System in India

7/30/2019 About Tax System in India

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About Tax System in India

The taxation system in the Republic of India is quite well structured. The Department of

Revenue of the Finance Ministry of the Government of India is responsible for the computation;

levy as well as collection of most the taxes in the country. However, some of the taxes are evenlevied solely by the Local State Bodies or the respective governments of the different states in

the nation.

Recent Changes in the Indian Taxation System

Over a period of 10 years to 15 years, the tax system in the nation has undergone some

significant changes. The entire system has been tremendously reformed. The slabs for theimposition of taxes have been modified. Besides that, the rates at which any particular tax is

being levied have been restructured as well as the various laws that govern the levying of taxes

were being simplified. All of these reformations have resulted in the following: Better compliance Better enforcement Easy payment of the levied taxes

The date of 1st April of the year 2005 is marked as the date of the implementation of the V. A.T. or the Value Added Tax by almost all the State Governments as a replacement of the earlier

Sales Tax. Some of the states in the Indian Republic, where V. A. T. has not been implemented

yet, still levy Sales Tax though. Apart from these, the process of rationalization of the tax laws

is still in progress.

Taxes Levied by the Central Government of India

The Central Indian Government that is officially named as the "Union Government" isresponsible for the imposition of both direct taxes as well indirect taxes. Listed below are some

of the taxes that are levied by the India Government:

Direct Taxes Banking Cash Transaction Tax Capital Gains Tax Corporate Income Tax Fringe Benefit Tax Personal Income Tax Securities Transaction Tax

Indirect Taxes Customs Duty Excise Duty Service Tax

Taxes Imposed by the State Governments

Though the majority of the taxes are levied by the Central Government of the country, there are

some taxes, which can not be levied by them. These kinds of taxes are the one of the sole


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responsibilities of the governments of the individual states. To name a few of such taxes in

India are: Dividend Tax Endowment Tax Estate Tax

Gift Tax Flat Rate Tax or Flat Tax Fuel Tax Inheritance Tax Transfer Tax Payroll Tax Poll Tax S. E. T. or Self Employment Tax Social Security Tax Usage Tax Value Added Tax or Sales Tax

Wealth TaxTaxes Levied by the Local Bodies

The Octori Tax or Entry Tax is the most famous tax, which is being imposed by the local bodiesor the municipal jurisdictions on the goods' entry.

Tax Incentives in India

The India Government offers tax incentives that are subject to some specified conditions. Such

incentives are provided for the following: Allowance for accelerated depreciation Corporate profit

Certain expense deduction on the basis of some particular conditionsA tax incentive is available for any fresh investment in any of the below mentioned sectors: Companies involved in Research and Development Development of housing projects Development by undertakings Food processing industry Infrastructure Mineral oil production and refining Operating industrial places Organisations handling food grains Power distribution Hospitals located in the rural areas Specialised economic zones Telecom services (For some specified services) Undertakings based in some specified hill states

India Income Tax Returns Online


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How to File Returns

For the given assessment year, Income India Return Tax is paid on the total income earnedduring the pre

ceding financial year.

Eligibility For individuals, Hindu Undivided Families, Association of Persons and Body of

Individuals, Income Tax Return has to be filed if the annual income is more than ` 50,

000 or if one out of six economic criteria is applicable, irrespective of the income. Companies need to file returns compulsorily every year. Firms and co-operative societies need to file return of income if they have any

income or if one out of six economic criteria is satisfied, irrespective of the income.

Note: Return of income has to be filed even if tax has been deducted at source. It has also to befiled by certain legal representatives and representative assessees.

Selecting the correct form

The forms prescribed for different types of Income Tax assessees are:

Form

No.1

Companies other than those claiming exemption under Section11

FormNo.2

Assessees other than companies and those claiming exemption u/s 11 of the I.T. Act,1961 and whose total Income includes 'profits and gains of business of profession'.

Form

No.2A

Resident individual assessees having income from any source other than business or

profession, it the total income does not exceed ` 2 lakh and if there is no brought forward

or carry forward loss except under house property.

FormNo.2B

Return of Income for the block period.(For search & seizure cases).

Form

No. 2CReturn of Income for those who come within the ambit of 'One out of six scheme.

Form

No. 2DIncome Tax Return Form for non Corporate Assessees other than persons claiming

exemption under Sec. 11 (Saral Form).

Form

No.3

For assessee (other than companies and those deriving income from property held for

charitable and religious purposes claiming exemption under section 11) whose totalincome does not include "profits and gains of business or profession.

Form

No.3A

For assessees including companies claiming exemption under section 11.

Wealth Tax Returns

Form A Return of net Wealth for individuals and Hindu undivided families.


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Form B Form of returns of net Wealth under sub-section (1) or sub-section (2) of section 14 of the

Wealth Tax Act, 1957, for companies only.

Paying Income India Return Tax

You have to pay the Income India Return Tax using the appropriate challan. Please mention

yourPermanent Account Number (PAN) and Assessing Officer Code number in the challan.The tax may be deposited in RBI, State Bank of India, IOB, Indian Bank, and other notified

banks. To get challans, you can contact the Public Relations Officer (PRO) at 8276737 or

yourassessing officer.

The check accompanying the challan has to be made payable to "Name of Bank/Branch - A/CIncome Tax" (in case the check is deposited in a branch different from where the assessee has

his account) or "Yourselves- A/C Income Tax" (if check is deposited in the branch where he has

account).

India Income Tax Rate

Income Tax Rate is the vital part of the income tax as charged by the Indian government ontaxable incomes of the individuals, companies, co-operative societies, firms, trusts and any

other artificial person.

The income tax, which is calculated on the basis of India income tax rate, is levied on each ofthe individual person and is governed by the Indian Income Tax Act. 1961. It is the Ministry of

Finance, Govt. of India, which determines the India income tax rate.

New Income Tax Rates

Individuals

The new India Income Tax Rates announced by Finance Minister of India for individuals whilepresenting the Union Budget 2011-12 in the parliament are listed below:

IT Slab (in INR) Tax to be Charged

Earnings from 0 to 1,80,000 (for men) NIL

Earnings from 0 to 1,90,000(for women) NIL

Earnings from 0 to 2,50,000(for senior citizens) NIL

Earnings from 1,80,001 to 5,00,000(for men) 10.00%

Earnings from 1,90,001 to 5,00,000(for women) 10.00%

Earnings from 2,50,001 to 3,00,000(for senior citizens) 10.00%

Earnings from 5,00,001 to 8,00,000 (for all) 20.00%


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Earnings more than 8,00,000 (for all) 30.00%

Amendments introduced to the Individual Income tax system for the FY 2010-11: Tax exemption of 20,000 on investment in tax saving Infrastructure bonds.

Exemption of up to 1,00,000 is already allowed under specific savings instruments. Introduction of new section in e-TDS/TCS form namely : PAO / DDO code; State

name; Ministry name; Name of the utility (for return purpose) and PAO / DDO

registration no 3% Education cess valid on income tax including 10% surcharge if applicable Tax exclusion will be specified for donations to the Central Government Health

Scheme (CGHS) Subsidiary tax relief offered to guarantee that the supplementary IT to be paid,

inclusive of additional charge on surfeit earnings of over Rs 1,000,000 is restricted to asum by which the earnings is above this mentioned sum.

Income tax exemption on agricultural income

Association of Persons (AOP) and Body of Individuals (BOI)The new India Income Tax Rates announced by Finance Minister of India for Association ofPersons (AOP) and Body of Individuals (BOI) while presenting the Union Budget 2011-12 in

the parliament are listed below:


Earnings upto 1,80,000 NIL

Earnings from1,80,000 to 5,00,000 10.00%

Earnings from 5,00,000 to 8,00,000 32,000/- + 20%

Earnings more than 5,00,000 92,000/- + 30%Co-operative Society

The new India Income Tax Rates announced by Finance Minister of India for Co-operativeSociety while presenting the Union Budget 2011-12 in the parliament are listed below:


Earnings upto 10,000 10.00%

Earnings from 10,000 - 20,000 1,000 + 20%

Earnings more than 20,000 3,000 + 30%

Income Tax Calculator 2012 - 2013, India

Income Tax Calculator India is used by taxpayers for precisely calculating their taxable income

and amount of taxes payable by them. Calculation of income taxes has always been plaguing

the taxpayers.


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The Central Board of Direct Taxes has laid down a number of rules and regulations that help

individuals and corporate houses to work out income tax.

Quick Tax Calculator

Total Annual Income in (INR):

(enter amount without comma)

Gender Male:

Female:

Are you a senior Citizen(Age above 65) ?

Yes:No:

The slabs of income tax are modified every year when the union budget is tabled by the finance

minister of India. In the year 2010, tax slabs were modified as well. In order to make thingssimpler for tax payers, tax calculators have been developed. An income tax calculator will helpyou carry out the most complicated calculations in the simplest way possible.

Step 1 Contenta) Income from Salary Head

b) Income from Business & Profession

c) Income from House Property

d) Income from Capital Gains Short Term

e) Income from Capital Gains Long Term

f) Income from Other Sources

Total Income

Step 2 Contenti) 80 C (Max 1 Lac)

(includes: PF, PPF, LIC, National Pension Plan, ELSS, NSCs, FD for a tenure of 5years, Housing Loan, tuition fees for children, Post office investment. )

i) 80 CCF (Max 20000)(includes: Invested in infrastructure bonds)

iii) 80 D (Max 40000)

(includes: Premium of Health Insurance paid for self, spouse, children & dependantparents)


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iv) 80 DD (Max 50000)(includes: Normal disabilities)

v) 80 U (Max 50000)

(includes: Normal disabilities)

vi) 80 G(includes: Deduction in respect of Various Donations)

vii) Others

Total Deduction

Step 3 ContentMan

Women Sr. Citizen >65 Years

Step 4 ContentTaxable Income

Basic Exemption

Your Tax

Education Cess @ 3%

Total Payable Tax

1 Step 1General Information

2 Step 2Enter Your Total Annual Income

3 Step 3You are ?

4 Step 4Total Payable Tax

About Tax in India

Tax, in general, is the imposition of financial charges upon an individual or a company by theGovernment of India or their respective state or similar other functional equivalents in a state.

The computation and imposition of the varied taxes prevalent in the country are carried on by

the Ministry of Finances Department of Revenue. During the last financial year of 2010
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2011, the gross collection of tax amounted to around INR. 7.92 trillion, where the direct tax has

got 56 % contribution and the indirect tax has got 44 % contribution.

Type of Taxes

Prevalence of various kinds of taxes is found in the nation. Taxes in this nation can be either of

direct or indirect ones. However, the types of taxes even depend on whether a particular tax isbeing levied by the central or the state government or any other municipalities. Following are

some of the major Indian taxes, which are categorized below:

Direct Taxes

This kind of tax is named so as such a tax is directly paid to the Union Government of India. Asper a survey, the Republic of India has witnessed a consistent rise in the collection of such taxes

over a period of the past years. The visible growth in these tax collections as well as the rate of

taxes reflects a healthy economical growth of India. Besides that, it even portrays thecompliance of high tax along with better administration of taxation. To name a few of the direct

taxes, which are imposed by the India Government are:

Banking Cash Transaction Tax Corporate Tax Capital Gains Tax Double Tax Avoidance Treaty Fringe Benefit Tax Securities Transaction Tax Personal Income Tax Tax Incentives

Indirect Taxes

As opposed to the direct taxes, such a tax in the nation is generally levied on some specified

services or some particular goods. An indirect tax is not levied on any particular organisation oran individual. Almost all the activities, which fall within the periphery of the indirect taxation,

are included in the range starting from manufacturing goods and delivery of services to thosethat are meant for consumption. Apart from these, the varied activities and services, which are

related to import, trading etc. are even included within this range. This wide range results in the

involvement as well as implementation of some or other indirect tax in all lines of business.

Usually, the indirect taxation in the Indian Republic is a complex procedure that involves lawsand regulations, which are interconnected to each other. These taxation regulations even include

some laws that are specific to some of the states of the country. The regime of indirect taxation

encompasses different kinds of taxes. The organizations offer services in all or most of the

related fields, some of which are as follows: Anti Dumping Duty Custom Duty Excise Duty Sales Tax Service Tax Value Added Tax or V. A. T.

Other Taxes in India


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Besides the taxes, the names of which are mentioned earlier, the nation has got the prevalenceof many other taxes. Listed below are some of those Indian taxes: Consumption Tax Death Tax

Dividend Tax Endowment Tax Estate Tax Flat Tax, which is even known as the Flat Rate Tax Fuel Tax Gift Tax Inheritance Tax Sales Tax (Solely on goods that do not include payment of sales tax on services) S. E. T. or Self Employment Tax Social Security Tax Transfer Tax

Payroll Tax Poll Tax Property Tax Wealth Tax

Municipal or Local Taxes in India

The most known tax, which is levied by the local municipal jurisdictions on the entry of goods,

is known as the Entry Tax or the Octori Tax.

Income Tax in India

Income tax in India is levied by the Government of India on taxable income of individuals,

companies, Hindu Undivided Families (HUFs), co-operative societies, firms, and trusts(recognized as association of persons and body of individuals) and any other artificial person.

Imposition of tax is different for every individual. Income tax imposition is regulated by the

Indian Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) has the overallresponsibility of regulating the Income Tax Department in India. It is a division of the

Department of Revenue under the Ministry of Finance, Government of India.

Overview of Income Tax in India

Charge to income tax

Every individual whose overall income surpasses the highest amount that is not chargeable

under the Income Tax Act becomes an assessee. His income is subject to taxation at the rate,

which has been stipulated by the Income Tax Act, 1961 for the pertinent assessment year. Thisis also dependent on the residential status of that particular individual.


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Income tax is a type of tax, which has to be paid at the rate prescribed by the Finance Act under

the Union Budget for each assessment year. This tax is calculated on the overall income made

in the past year by every individual.

The variance is dependent on the type of income, whether it is capital gains or revenue income.

Given below are the Income Tax Rates/Slabs for various ranges of income: Up to 1,60,000 = Nil Up to 1,90,000 (for women)= nil Up to 2,40,000 (for resident individual of 65 years or above)= Nil For men 1,60,001 - 5,00,000 = 10% 5,00,001 - 8,00,000 = 20% 8,00,001 upwards = 30%

Education cess is imposed @3% on income tax.

Residential status

The three residential statuses are as follows: Ordinarily Residents (Residents) Resident but not Ordinarily Residents and Non Residents.

Many steps are required to ascertain the residential status of an individual.

All residents are liable to pay tax for their overall income, which includes income received

away from India. Nonresidents are liable to pay tax only for the income obtained in India orincome accumulated in India. Not Ordinarily Residents are liable to pay tax with regard to

income obtained in India or income accumulated in India and income received from profession

or business regulated from India.

Heads of income

For calculating income tax in India, the heads of income of an individual are categorized

into the following: Income from salary Income from business or profession Income from residential property Income from capital gains Income from other sources

Income from other sources includes the following types of income: Income from horse racing Income by means of dividends Any amount obtained from key man insurance policy and gift. Income from winning bull races Income from shares or dividend

Tax deductions available in India

You can enjoy the following tax deductions on your income:


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Medical bill reimbursement House rent allowance Conveyance allowance Professional taxes Deductions u/s 80C of the Income Tax Act, 1961

Deduction u/s 80CCF: Investment in infrastructure bonds Deduction u/s 80D: Medical insurance premiums Interest on housing loans

Income tax rates in India

Individual income tax is a form of progressive tax in India and there are three slabs.

Approximately 10% of the people attain the minimum limit of taxable income

New tax slabs are applicable since April 1, 2010 and they are as follows: No tax will be imposed on total income of up to ` 1,60,000 per year. (` 190,000

for women and ` 2,40,000 for senior citizens aged 65 and over. All of them should be

residents of India.) From 1,60,001 to 5,00,000: 10% of amount above ` 1,60,000 (Lower limit varies

suitably for women and senior citizens) From 5,00,001 to 8,00,000: 20% of amount above ` 5,00,000 + 34,000 (` 26,000

for senior citizens and ` 31,000 for women) Greater than 8,00,000: 30% of amount above ` 8,00,000 + 94,000 (` 86,000 for

senior citizens and ` 91,000 for women)No surcharge would be imposed from the assessment year 2010-11.

Last Updated on 6/15/2011

Income Tax Filing in India

The last date for submitting the acknowledgment form for the financial year of 2011-12 has

been extended to March 31, 2012. Tax payers can avail the My Account option in case they

want refund on their payments. The same facility is available for tax payers who wish to resendthe CPC - Intimation u/s 143 (1) /154.

Digital Signature Certificates have been made regulatory with immediate effect from July 1,

2011. This will be applicable for individuals and companies whose accounts have to be audited

as per section 44 AB of the Income Tax Act of 1961.

New Process for Filing Tax Returns through Legal Heirs

with DSC


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When legal heirs file their income tax returns they need to get their DSC. They are required to

make the request through an e mail to [email protected]. They are also supposed to

provide the following details in this application: Name Date of birth of the Legal Heir

PAN Scanned attachment copy of the deceased's death certificate Date of birth of the deceased

Once these details are provided the Legal Heir will be able to file the returns of the deceased

individual through the DSC.

Tax Credits in 26AS Statements

Tax payers should verify the tax credits they are eligible to receive through their 26AS

statements before they file their income tax returns. This will help them get refunds in lessertime and the entire process will be completed quicker than usual. In case there are irregularities

in the 26AS statement, tax payers can get in touch with the Deductors.

Process of filing income taxes in India

The first step of filing income tax in India is choosing the appropriate kind of return form. The

taxpayers need to download the appropriate preparation software for the return form inquestion. Afterwards they are supposed to file an offline return and create a XML file.

Once these processes are completed, the taxpayers need to register on the following site and

create their username and passwords:

https://incometaxindiaefiling.gov.in/portal/index.do

Afterwards they can login at the site and click on the concerned panel and then select the"submit return" button. Once it is done they can upload the XML file. As soon as the entire

process is done successfully the acknowledgment details are displayed and they can get

printouts of the ITR-V or acknowledgment form.

Tax payers can sign the acceptance form digitally or offline. Once it is done the tax payers need

to obtain a printed copy of the same and mail it to the following address:

Income Tax Department - CPC, Post Bag No - 1, Electronic City Post Office, Bengaluru -560100, Karnataka The mail should be send only through speed post or ordinary post and it

should be sent within 120 days after the data is transmitted. The form will not be accepted if it

is sent via courier or registered post.Income Tax Filing Statistics in India

The following table shows the income tax statistics for various forms in 2011-12:

Form name Statistics for 2011-12 Growth percentage in 2011-12 compared to 2010-11

ITR-1 35,44,687 127.66%
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ITR-4 & 4S 49,74,560 85.81%

ITR-2 11,95,396 85.75%

ITR-5 6,01,781 17.95%

ITR-3 2,82,576 60.64%ITR-6 5,12,404 8.45%

Aggregate 1,11,11,404 84.08%

The following table provides highlights of tax filing in the 2011-12 fiscal:

Category Statistics

Registered users as of December 31, 2011 1,73,05,170

Highest use of bandwidth to file income tax returns 200 Mbps

Highest rate of receipt of returns for each minute 1064. This was achieved on July 30 at 4:39

pm

Percentage of returns received after regular office

hours

23 percent

Highest rate of receipt of returns for each hour 53,667. This was achieved on July 30between 5 to 6 pm

Percentage of returns submitted with facilities

provided by the IT department

30 percent

Highest rate of receipt of returns for each day 5,59,152. This happened on July 30

Income Tax Filing in India: State-wise Breakdown

State Number of E-returns

Maharashtra 24,14,526

Assam 62269

Gujarat 13,10,269

Chandigarh 59449

Karnataka 9,45,342

Himachal Pradesh 46580

Delhi 9,08,602

Goa 39753


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Tamil Nadu 7,83,397

Jammu and Kashmir 29558

Uttar Pradesh 7,45,254

Pondicherry 16028Andhra Pradesh 6,17,390

Outside India 8922

Rajasthan 5,95,751

Tripura 6057

West Bengal 5,63,617

Dadra and Nagar Haveli 5098

Punjab 4,91,715Andaman and Nicobar Islands 4407

Madhya Pradesh 3,86,437

Daman and Diu 3150

Haryana 3,48,224

Meghalaya 2756

Kerala 2,37,039

Arunachal Pradesh 1400Orissa 1,14,447

Nagaland 1325

Chhattisgarh 1,02,782

Manipur 1171

Jharkhand 93783

Sikkim 1036

Bihar 91585Mizoram 204

Uttaranchal 71936

Lakshadweep 145


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Last Updated on 2/20/2012

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 leviedagainst 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


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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 theadjudication by the National Tax Tribunal of disputes with respect tolevy, assessment, collection and enforcement of direct taxes and alsoto provide for the adjudication by that Tribunal of disputes with respectto the determination of the rates of duties of customs and centralexcise on goods and the valuation of goods for the purposes ofassessment of such duties as well as in matters relating to levy of taxon 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 BudgetaryManagement Act, 2005- An Act to provide for the responsibility ofthe State Government to ensure inter-generational equity in fiscalmanagement, fiscal stability

Finance (No. 2) Act, 2004- The following Act of Parliament

received the assent of the President on the 10th September, 2004, andis hereby published for general information:- An Act to give effect to thefinancial proposals of the Central Government for the financial year2004-2005

Finance Act, 2004- An Act to continue for the financial year2004-05 the existing rates of income-tax and the levy of the NationalCalamity Contingent Duty and the National Calamity Contingent Duty ofCustoms 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) ofsection 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


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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

Last Updated on 14th June 2011

History of TaxationThe history of taxation dates back to time immemorial and it is not a recent development by

any account. A thorough research on the history of taxation system shows that taxes were levied

on either on the sale and purchase of merchandise or livestock.

Further, the history of taxation suggests that the process of levying and the manner of taxcollection were unorganized. But it suggests that all historical leaders and head countrymen

collected taxes to run its authority. In other words taxes on income, sale, purchase andproperties were collected to run the ruling Government machineries. Further, these taxes werecollected to meet their military and civil expenditure and also to meet the common needs of the

subjects like maintenance of roads, drainage system, government buildings, administration of

justice and other functions of the region. day India tax machinery is very much based on thatlaid down foundation.

Although, there were no homogeneous tax rate structures but it depended on the production

capacity and commodity of that particular country and/or region. Moreover, the tax rates and

quantum varied according to the annual production. These taxes were collected in cash or inkind and it entirely depended on the type of commodity or service on which it was levied upon.

For example, there was a very common practice of selling food crops and cash crops togovernment machineries against no money. The history of taxation suggests these were done to

store government buffer stocks to meet emergencies. Taxes were levied on all classes ofcitizens, like actors, dancers, singers and even dancing girls. Taxes were paid in the form of

gold-coins, cattle, grains, raw-materials and even by rendering personal service.

In India, the tradition of taxation has been in force from ancient times. It finds its references in

many ancient books like 'Manu Smriti' and 'Arthasastra'. There was a perfect admixture ofdirect taxes with indirect taxes and they were varied in nature. India's history of taxation

suggests existence of a large and composite taxable population. With the advent of the moguls

in India the country witnessed a sea of change in the taxation system of India. Although, theyalso practiced the same norm of taxation but it was more homogeneous in structure and

collection. The period of British rule in India witnessed some remarkable change in the whole

taxation system of India. Although, it was highly in favor of the British government and its

exchequer but it incorporated modern and scientific method of taxation tools and systems. In1922, the country witnessed a paradigm shift in the overall Indian taxation system. Setting up of

administrative system and taxation system was first done in the history of taxation system in

India. The period thereafter witnessed rapid growth and modernization of the Indian taxationsystem and the present.


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Last Updated on 14th June 2011

Tax Slabs in IndiaThe announcement of new India tax slabs in the Union Budget 2011-12 brought some relief tothe common man. According to the Finance Minister Pranab Mukherjee, the expansion of tax

slabs will not only provide considerable respite to taxpayers but would also trigger savings and

their consumption for infrastructure development. He has also declared a tax exemption on

`20,000 for investing in tax saving infrastructure bonds, which would be over and above thecurrent limit of ` 1 Lakh on tax discounts under section 80 C.

Finance Minister has also introduced a new Income Tax Slabs for all men, women and seniorcitizens for the financial year 2011-12. A number of earning individuals were hoping for a

comeback of Standard Deduction, but were left unpleased after the announcement. Under thenew tax slabs, base slab for tax payers has been increased to Rs. 1.8 lacs from 1.6 lacs. Also thesecond slab with 10 % income tax bracket on taxable income up to Rs. 3 lacs has been

increased to Rs. 5 lacs.

Different Tax Slabs in IndiaEvaluating the New Income Tax Slabs and comparing it with the statistics of previous year,

reveals not enough benefits for low-earning group of upto 3 Lakh as they are entitled for any

tax deduction. Comparatively, individuals falling under the category of high-earning group willreceive more benefits from latest declarations.

Income Tax Slabs for FY 2011-12

IT Slab (in INR)

Assesee Type From To Tax to be Charged

Male 0 1, 80, 000 NIL

180001 500000 10%

500001 800000 20%

800001 and above 30%

Female 0 190000 NIL

190001 500000 10%

500001 800000 20%


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Senior Citizens 0 250000 NIL

250001 500000 10%

500001 800000 20%


Impact of New Tax Slabs on Savings for FY 2011-12:

After the declaration of new tax slabs in India it is vital to assess its impact on savings. The

chart below evaluates savings under different categories of earning individuals:

Earnings Previous IT Slab New IT Slab Individual Savings

180,000 2060 0 2,060

3,00,000 14,420 12,360 2,060

4,00,000 24,720 22,660 2,060

5,00,000 35,020 32,960 2,060

6,00,000 55,620 53,560 2,060

7,00,000 76,220 74,160 2,060

8,00,000 96,820 94,760 2,060

9,00,000 127,720 125,660 2,060

10,00,000 158,620 156,560 2,060

Professional Tax

If you are a professional or a working individual of a reputed organization, then you are

required to pay professional tax. Professional tax in India is a state-level duty.

What is professional tax?

In India, this tax is imposed by various states. It is imposed on business owners, working

individuals, merchants and people carrying out various occupations. The following states

impose this levy in India - Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamilnadu,Gujarat, and Madhya Pradesh.


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Professional tax is levied by particular Municipal Corporations and majority of the Indian statesimpose this duty. It is a source of revenue for the government. The maximum amount payable

per year is ` 2,400/- and in line with your salary, there are predetermined slabs. It is paid by

every member of staff employed in private companies. It is subtracted by the employer each

month and sent to the Municipal Corporation. It is compulsory as income tax. You will beeligible for income tax deduction for this payment.

Criteria in various states of India

In Maharashtra, this duty is applicable both on individuals and companies as laid down by the

guidelines of the Maharashtra Professional Tax Act of 1975.

Every individual living in Maharashtra, involved in any business, profession, occupation oremployment is legally responsible to pay it and has to get a Certificate of Enrolment from the

Professional Authority.

As soon as you receive this certificate, you can fulfill your personal tax liability for 5 years bymaking a one-time payment, which is equivalent to the sum of Professional Tax for 4 years

beforehand, getting relief for payment of one year.

In Tamil Nadu, it is imposed by the Municipal Council on businessmen, professionals, andemployed individuals.

Every company which conducts business and every individual, who is involved directly in any

business, occupation, or employment in the town panchayat on the first day of the half-year for

which return has been submitted, needs to pay biannual tax at the rates stipulated.

Professional Tax Slabs in Various States

In West Bengal

Income Tax to be imposed

Upto 1,500 Nil

From 1501 To 2001 ` 18

From 2001 To 3001 ` 25

From 3001 To 5001 ` 30

` 5001 ` 40

From 6001 -7001 ` 45

From 7001 to 8000 ` 50

From 8001 to 9000 ` 90

From 9001 to 15,000 ` 110


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From 15001 to 25,000 ` 130

From 25,001 to ` 40,000 ` 150

Beyond 40,001 ` 200

In Maharashtra


upto 2500 Nil

From 2500 to 3500 ` 60

From 3500 to ` 5000 ` 120

From 5000 to ` 10000 ` 175

More than 10000 ` 200

In Tamil Nadu


Upto 21000 Nil

From 21001 to 30000 ` 75

From 30001 to 45000 ` 188

From 45001 to 60000 ` 390

From 60001 to 75000 ` 585

More than 75001 ` 810

In New Delhi


Upto 1,10,000 Nil

From 1,10,000 To 1,45,000 Nil

From 1,45,000 To 1,50,000 10 %

From 1,50,000 To 1,95,000 20 %

From 1,95,000 To 2,50,000 20 %


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More than 2,50,000 30 %

Service taxService tax in India is an important form of indirect tax. The Central Board of Excise and

Customs (CBEC) has the responsibility of collecting the levy in different states in India. It isnot imposed in the state of Jammu and Kashmir. Currently, the rate is 10%.

What is service tax?

It is a type of indirect duty levied on particular services that are categorized as taxable services.

The responsibility of paying this kind of levy lies on the service provider. This duty can't belevied on services that are not included in the specified list. Over last one or two years, the

domain of service tax been broadened to include new services.

The goal behind imposing service tax in India is to lower the extent of concentration of taxationon business and industry without compelling the government to find the middle ground on the

revenue requirements.

Initiative of the Government

Pranab Mukherjee, the Union Finance Minister of India, in his budget speech has pointedtoward the government's aim of combining all levies such as Excise, Service Tax, and VAT into

a Universal Goods and Service Tax by the year 2011. For accomplishing this goal, the CEST

rate will be gradually changed and taken to a general rate. While tabling the budget for 2008-2009, it was declared that all small-scale service providers whose turnover is less than or equal

to Rs.10 lakhs don't have to pay this tax.

Synchronization of CENVAT and Service Tax Rate

By increasing the rate of CENVAT to 10%, equal to that of Service Tax, Mr. Pranab

Mukherjee, the Finance Minister has adopted the initial measure on the road to synchronizing

tax on Services and Goods.

In spite of the fact the current rate of 10% may not essentially be the customary rate of CentralGST, Service Tax and CENVAT will henceforth go simultaneously until GST is put into

operation.

To dismiss the anticipation that the rate of CSGT might be 10%, the Finance Minister has in a

conference mentioned that the Revenue Neutral Rate (RNR) of CGST is still to be decided andthe CGST Standard Rate may not essentially be 10%.

Taxed Services


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Since the time of its inception in 1994-1995, only three services were liable to be taxed. From

that time, the Government of India has introduced almost 100 categories under its ambit, which

include the following: Traveling agencies (road. air, and railway services) Telecommunication

Management consultants Architects Credit rating agencies Colleges, universities, and schools Broadcasting services (television and radio) Market research analyst Authorized service stations Banking and other financial services Cargo and shipping Export import unit Hospitals and health care providers/services

Telegraph services Maintenance and repair services Storage and warehousing services Retail stores Franchise owner Packaging services Transportation of goods Cable operators Airport services Beauty parlors Event managements Real estate agents Dry cleaning services Insurance underwriting agencies Consultants of different services Passport services Stock brokers Legal advising units Immigration services Customer service units Chartered accountant firms Tourist services Technical support advising firms Electronic and electrical service stations Automobile service stations Membership of clubs and association Human resource services Survey and exploration of minerals Share and stock transfer agent


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Internet telephony services Cost accountant Transport of goods by air Security agencies Pager services

Health clubs Ship management services Custom house agent Port services Containers by rail General insurance services Postal services

Exemptions for Service Tax in India

The Government of India can offer part or complete exemption by circulating an exemptionnotice. However, it cannot be offered with retrospective effect. Some of the exemptions are as

follows: Small-scale service providers whose turnover is below Rs.4 lakhs per year are

relieved from payment of this tax. Services offered to United Nations and Global Agencies and provisions to Special

Economic Zones (SEZ) are excepted from payment of service tax. It is not imposed on export of services. Service tax is not payable on cost of commodities and substances rendered at the

time of offering services. This kind of exemption is allowable only if CENVAT credit on

those commodities and substances is not collected.

Sales Tax

Sales tax is levied when goods are sold or bought within a country or a state. Thereare two major types of sales taxes central sales tax and sales taxes, which arecharged by the state governments. The central sales tax is levied by the UnionGovernment.

Central sales taxes are applied when a dealer sells goods during interstatecommerce or trade. These taxes are also implemented when a product is soldoutside a state or when it is exported or imported.

The basic rule of sales taxes is that majority of products are liable to be taxed withthe exception of drugs and food. Most of the services are exempted from salestaxes. In recent times, however, the state governments have been adding to the

list of services that can be subjected to sales taxes.

It is advisable for the dealers to check with the relevant state sales taxdepartments to get the complete list of products and services that can besubjected to the said tax.

Sales Tax: Concerned Authority and Taxpayers


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Sales taxes are provided to the concerned authorities of the state which is sourceof the transfer of the goods in question. Every dealer who sells goods in a stateduring interstate commerce and trade is supposed to pay these taxes.

Sales Tax Offences and Punishment

Following are major offences committed in the domain of sales tax: Providing incorrect information in Forms C, F, E-I, H, and E-II. Misappropriating goods that have been procured at a discounted rate

as per Form C. Not obtaining registration as per the CST Act or not adhering to the

related security provisions. Owning Form C without adhering to the CST Act regulations. An incorrect statement from a registered dealer that the purchased

goods have been covered as per an authentic certificate of registration forconcessional rates obtained by the same.

If an unregistered dealer collects an amount as sales tax. This is also

applicable in case a registered dealer does the same thing in violation of theCST Act.

Falsely projecting oneself as a registered dealer.

Sales Tax: Corporate InformationIf a receiver or liquidator is employed for a company that is presently being shutdown, the officer should provide information about his or her hiring to theconcerned sales tax authorities within 30 days of his hiring.In case of such companies, the preferential creditors are regarded as the sales taxauthorities and they will inform the officer about the tax amount to be paid within atime period of 3 months.

The liquidator is not supposed to sell off any assets of the particular companybefore paying the remaining sales taxes. However, they can sell off the assets forthe purpose of generating the money needed to pay the taxes that have to be paidas per the CST Act.

This procedure can also be followed if the company needs to pay off certaincreditors before the government receives its tax dues. The liquidator or receiver,still, needs to consult the relevant authorities before taking such a step.

In case a company is liquidated without the recovery of the amount, the director orgroup of directors need to pay off the amount. Directors can still avoid paying thistax if they can prove the payment was due as a result of negligence, financialmisappropriation or failure to perform the required duties.

Sales Tax: Authority

The states cannot impose sales taxes in case the sale or purchase happens outsideits limits of jurisdiction and if the goods are being exported or imported from and inIndia. In such cases, only the parliament has the authority to levy these taxes.

Sales State Tax Laws: Major Principles


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The important principles applicable in case of state sales tax laws may beenumerated as below: A good is regarded as sold/bought when the transfer involves money. When the dealers are being assessed they need to provide all the

documents and proofs of their tax payment so that the commercial or sales

tax officer is satisfied. In majority of the transactions, sales tax applies on the basis of a

single point. All the states have different procedures for appeals made by the

assessees. In some states the assessees are categorized into manufacturers,

selling agents, and dealers, and they are required to obtain necessarycertificates. Different rates apply to these entities.

All the dealers are supposed to make application registrations andprocure it as well. The registration number needs to be provided for all cash orbill memos.

Sales Tax ID NumbersThe sales tax ID numbers are primarily business versions of the Social SecurityNumbers. The holders of these numbers can both pay and collect sales taxes ongoods specified by the respective state governments. These numbers are normallyprovided within a month of application by the state departments of taxation.

Sales Tax ExemptionsExemptions from sales taxes are offered if the product or service has been sold toa reseller like a retailer or wholesaler who has an authentic state resale certificate.If assets are sold to tax-exempt organizations like charities or schools thenexemptions provided as well.

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