Classification of tax

Classification of Tax, Important Definitions

1. DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 1
Mr. K. GANESHA MOORTHY
Assistant Professor,
Department of Commerce (Corporate Secretaryship),
Ayya Nadar Janaki Ammal College, Sivakasi.
Classification of Taxes and
Important Definitions

2. DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 2
GST

3. ClassificationofTaxes
Taxesareclassifiedintotwoi.e.,DirectTaxandIndirect
Tax.
DirectTax
DirectTaxesatCentrallevel
DirecttaxesatStatelevel
DirectTaxesatlocallevel
IndirectTax
CentralExciseDuty
CustomsDuty
GoodsandServicesTax
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 3

4. DirectTaxesatCentrallevel
IncomeTax
Incometaxispayablebyindividuals,HUF,AOP,BOI,
Co-operativeSocieties,PartnershipFirms,Companiesetc.,
Incometaxisamajorsourceofincometothecentral
government.
CorporationTax
Incometaxispaidbylimitedcompaniesiscalled
CorporationtaxorCorporatetaxorCompanytax.Itis
leviedontheprofitsmadebythecompaniesaspertherates
givenintheFinanceActpassedbyParliamentannualy.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 4

5. DividendTax
LimitedtaxinIndiaarerequiredtopaydividendtaxat
10%onthedividendpaidbythemtotheirshareholders.This
taxisinadditiontothecorporationincometax.
WealthTax
Itisimposedonthewealthorassetsheldbyindividuals.
Itisleviedeveryyearonthetotalvalueofperson’spropertyor
wealth.Itispayableat1%onthenetwealthexceedingrupees
15lakhs.
GiftTax
Anygiftreceivedwithorwithoutconsiderationinexcess
ofRs.50,000inafinancialyearwillbeaddedtoyourincome
fromothersourcesandtaxedaccordingtoyourslabrate.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 5

6. II.DirectTaxesatStateLevel
LandRevenue
Landrevenueispurportedtobethestate’sshareinthe
outputfromland.InIndia,landrevenueisabolishedin
somestatesandtheratesvariedfromstatetostate.
AgriculturalIncomeTax
Itisdefinedasataxonincomeearnedfrom
agricultureorotherrelatedactivities.Indianconstitution
speciallyprovidesforlevyofagriculturalincometaxbthe
stategovernments.However,nostategovernmenthas
actuallypassedlegislationtotaxagriculturalincomes.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 6

7. ProfessionalTax
Thisisataxonprofessionals,payableannually.State
governmentfixesaspecifiedamounttobeaidbyeach
categoryofprofessionals.Eachprofessionalspaysthe
professionaltaxasalumpsum,onetimepaymentperyear.
Itmaybepaidintwoinstalments.
Incasetheprofessionalsworkingassalaried
employees,theemployerdeductstheamountoftaxintwo
instalmentsformthesalaryofemployees.
III.DirectsTaxesatLocalGovernment
LocalgivernmentslikeMuniciaplities,Panchayats
levysometaxeslikehousepropertytax,watertaxetc.,
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 7

8. IndirectTax
CentralExciseDuty
AnExcisedutyisataxongoodsproducedor
manufacturedwithinthecountryeitherintheprocessoftheir
manufactureorbeforetheirsaletocustomers.Itisleviedonthe
commoditieslikeBeverages,Sugar,Petrol,Tobacco,Cloths
etc.,
CustomsDuty
customdutiesaretaxesimposedongoodsastheycrossa
nationalboundary.Theyareleviedongoodsastheyimported
intoIndiafromothercountries(Importduties)andalsoon
goodsexportedfromIndiatoothercountries(Exportduties).
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 8

9. GoodsandServicesTax
TheGoodandServicesTax(GST)isataxleviedon
mostgoodsandservicessoldforconsumption.GSTispaid
byconsumersbutitisremittedtothegovernmentbythe
businesssellinggoodsandservices.Ineffect,GSTprovides
revenueforthegovernment,bornebytheconsumers.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 9

10. DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 10
Differencesbetween Direct and Indirect Taxes
Basis DirectTax Indirect Tax
1. Nature Progressive in nature Proportional in nature
2. EquitabilityAbilityto pay is taken into account,
thus satisfying the equity principle
Ignores the equity principleas it does not
distinguish between the tax payers
3. ShiftabilityShifting is not easyand the tax payer
has to bear the tax
The tax can be shifted to other
individuals
4. IncidenceIncidenceof tax is directly on the tax
payer
Incidence is on traders or manufacturer,
but shifted to buyers of goods
5.Pointof
levy
Levy ison persons who possess
property or earn income
Levy ison persons who spend their
income or incur expenditure

11. DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 11
Differencesbetween Direct and Indirect Taxes
Basis DirectTax Indirect Tax
6.Burden of
tax
The rich and wealthy usually bear
the burden
Burden is proportionate butrelatively
heavy on the poor
7.Impact on
cost and
prices
Commodity pricesare not affectedIncreases cost and prices of goods and
services
8. Scopefor
tax evasion
Scopefor evasion is high through
falsification of accounts and
suppression of income
Scope for evasion is low as the tax forms
part of productor service price

12. ImportantDefinitions
AssessmentYear
Thetaxpayer’sincomeofthepreviousyearis
assessedtotaxintheassessmentyearattheratesprescribed
bytheFinanceActfortheassessmentyear.
Assessmentyearmeanstheperiodoftwelvemonths
beginningfrom1
st
Aprileveryyearandendingon31
st
Marchoftheimmediatelyfollowingyear.
Thecurrentassessmentyear2020–2021.
Itcommenceson1
st
April2020andwillendon31
st
March
2021.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 12

13. PreviousYear
Incomeearnedinayearistaxableinthenextyear.
Theyearinwhichincomeisearnedisknownasprevious
year.
Previousyearmeansthefinancialyearimmediately
precedingtheassessmentyear.Ataxpayer’sincomeofthe
previousyearisassessedtotaxintheassessmentyear.
Thecurrentassessmentyear2020–2021,therelevant
previousyearwillbethefinancialyear2019–2020.i.e.,1
st
April2019to31
st
March2020.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 13

14. Person
AccordingtoSec2(31)thetermpersonincludesthe
following:
Anindividual
AnHinduUndividedFamily
ACompany
AFirm
AnAssociationofPersons(AOP)
BodyofIndividuals(BOI)
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 14

15. Assessee
Assesseemeansapersonbywhomanytaxorother
sumofmoneyispayableunderthisact,andincludes–
i.Everypersoninrespectofwhomanyproceedings
underthisacthasbeentakenforassessmentofhisincome.
ii.Everypersonwhoisdeemedtobeanassesseunder
anyprovisionofthisact.
iii.Everypersonwhoisdeemedtobeanassessein
defaultunderanyprovisionofthisact.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 15

16. Income
Incomeisaperiodicalmonetaryreturnwithsomesort
ofregularity.Theword‘Income’coversreceiptsinthe
shapeofmoneyormoney’sworthwhicharisewithcertain
regularity.
However,allreceiptsdonotformthebasisoftaxation
undertheAct.
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 16

17. Thank You
DIRECT TAX UNIT –I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 17