Direct tax

my presentation

1. G.PRIYA M.Com ( I year ) DIRECT TAX IN INDIA

2. DIRECT TAXES LEVIED BY CENTRAL GOVERNMENT 2

3. INCOME TAX Introduced by Sir. James Wilson Income tax Act was passed in1886, which was amended in 1922, 1939, and1947. Income tax in India is levied and collected on the basis of finance Act passed every year under central budget and the Income tax act1961, aided by the income tax rules,1962. Payable by individuals, HUF, AOP, BOI, AJP, co-operative societies, partnership firms, companies etc. 3

4. CORPORATION TAX 4 Income tax paid by limited companies is called corporation tax. It is levied on the profit made by companies as per the rates given in the finance act passed by parliament annually. All profit companies are required to make advance payment annually. Corporation tax forms the major chunk of income tax in India.

5. DIVIDEND TAX 5 Limited companies in India are required to pay dividend tax at10%on the dividend paid by them to their shareholders. This tax is in addition to the corporation income tax.

6. CAPITAL GAIN TAX 6 Capital gain tax was introduced in 1947 by finance minister Liquat Ali Khan. It was abolished in1950 and reintroduced again in1956. This tax is applicable to individual as well as companies. It is payable on gain realised from capital assets.

7. WEALTH TAX 7 It was introduced by Prof.Kaldor in1957. Wealth tax is imposed on the wealth or assets held by individuals. It is levied every year on the total value of a person’s property or wealth or capital. It is payable at 1%on the net wealth exceeding rupees15 lakhs .

8. GIFT TAX 8 It was introduced in 1956. With effect from 1November 1998 gift tax was abolished due to its low yield to the union government. To complement estate duty and also to prevent large scale avoidance of estate duty.

9. ESTATE DUTY OR INHERITANCE TAX OR DEATH DUTY 9 Estate duty was introduced in India from October1953. Death taxes assume two major forms. One is called Estate Duty which is levied upon the entire estate left by a decreased person. The other form is Inheritance tax which is levied on the separate shares of the estate transferred to the beneficiaries. It was abolished from 16 th march 1985.

10. DIRECT TAXES AT STATE LEVEL 10

11. LAND REVENUE 11 Land Revenue was the most important source of revenue to the government. Land Revenue is purported to be the state’s share in the output from land. Land Revenue is abolished in some states and others the rate varies from state to state.

12. AGRICULTURAL INCOME TAX 12 Agricultural Income Tax is defined as a tax on income earned from Agriculture or other related activities. Indian constitution specifically provide for levy of Agricultural Income Tax by the state government No, state government has actually passed legislation to tax Agricultural Incomes.

13. PROFESSIONAL TAX 13 This is a tax on Professionals, payable annually. State government fixes a specified amount to be paid by each category of Professionals. It may be paid in two instalments. In case of Professionals working as salaried employees, the employer deducts the amount of tax in two instalments from the salary of the employees .

14. DIRECT TAXES AT LOCAL GOVERNMENT LEVEL 14 Local governments like municipalities, corporations, panchayats levy some direct taxes like house property tax.

15. EQUITY 15 Direct taxes based on the principle of “ability of the tax payer to pay”. They are comparatively just and equitable because people with large income usually have to pay more direct taxes than those with lower incomes.

16. ECONOMY 16 Direct taxes are mostly progressive, the tax revenue rises without any corresponding addition to cost of collection. The administrative cost of collecting direct taxes is low because the same tax officials who assess small income or properties can assess large income and properties.

17. CERTAINTY 17 There is an element of certainty in the case of direct taxes. The tax payer knows the amount of tax to be paid and the time of payment. The government is also fairly certain how much it can receive as tax

18. CONVENIENCE 18 Most of direct tax are collected at the source itself, it is convenient for tax payer s to pay.

19. ELASTICTY AND PRODUCTIVITY 19 Increase of rates of tax can bring in more revenue . Tax also will be more when incomes of tax payers increase .

20. LESS POSSIBILITY OF LEAKAGE 20 The possibility of leakage in the amount collected as direct taxes is rare. The whole amount collected reaches the state treasury.

21. REDUCTION IN INEQUALITIES 21 Direct taxes affect the rich and take away a significant portion of their income and wealth. Such collection can be used to rise the income levels of poor citizens.

22. CIVIC CONSCIOUSNESS 22 Direct taxes arise civic consciousness and they educative value . Tax payers who pay direct tax naturally take interest in the usage of funds by the government. Such interest in the methods of public expenditure can lead to protests if the public funds are misused or misappropriated.

23. TRACING EFFECT OF DIRECT TAXES 23 It is possible to trace the effect of direct taxes easily. If necessary, the adverse effect can be minimized.

24. DEMERITS OF DIRECT TAXES 24

25. UNPOPULAR 25 Direct taxes are generally not shifted and are paid in lumpsum for the whole year. As a result, they are painful to the tax payers. Hence they are unpopular and resisted. They are opposed sometimes with political disturbances.

26. POSSIBILITY OF EVASION 26 “A direct tax is a tax on honesty”. It is not evaded only when the tax payer is honest. It can be evaded through fraudulent practices.

27. INCONVENIENCE 27 Tax payers have to submit statement of income along with sources of income, thus revealing their private affairs. Moreover, payment of lumpsum amount at a time may also be inconvenient.

28. ARBITRARINESS 28 Tax rates are generally arbitrary because there are no scientific principle to determine them. Whims and fancies of tax authorities may cause overestimation or underestimation of taxable capacity of the people.

29. COMPLEXITY 29 Direct tax laws are usually complex with a lot of exemptions, procedures and provisions which are not understandable by common citizens. Producing necessary ‘returns’ and preparing required accounts may necessitate assistance of professional accountants or auditors.

30. POSSIBILITIES OF INJUSTICE 30 It is difficult to assess the income of all classes accurately. So ,direct taxes may not fall with equal weight on all classes. Injustice may be done to different sections of citizens, leading to protests.

31. UNSUITABLE TO UNDER DEVELOPED COUNTRIES 31 Rich people are in an insignificant minority compared to mass of poor in under developed countries. So, revenue collection from direct taxes may not be productive and economical.