Tuesday, March 13, 2012

All you wanted to know about different taxes :

Direct Taxes: It's the tax individuals & companies pay directly to the govt. 

Corporation Tax: It's the tax companies pay (30% at present) on their profits. 

Taxes On Income Other Than Corp Tax: It's income-tax paid by individuals or 'non-corporate assessees'. This ranges from 10% to 30%, depending on income. 

Securities Transaction Tax ( STT): Applicable if you're dealing in shares or mutual fund units. It was introduced in the 2004-05 budget, replacing the tax on profits earned from the sale of shares held for more than a year (known as long-term capital gains tax). 

Minimum Alternate Tax (MAT): Indian companies pay 30% tax on profits as per the I-T Act. But tax holidays could lower the outgo. If a company's tax liability is less than 10% of its profits, it has to pay a MAT of 15% of book profits. This provision is expected to change once the direct taxes code (explained below) proposals are accepted. Under DTC, MAT will be levied on gross assets. 

INDIRECT TAXES: It's essentially a tax on expenditure. Considered regressive, this tax does not distinguish between the rich and the poor and hence most governments prefer to raise their revenues through direct taxes. 

Customs: Anything you bring from abroad comes at a price. By levying a tax on imports, the government achieves twin objectives: it raises revenues and protects local industries. 

Union Excise Duty : Imposed on goods manufactured in the country. 

Service Tax: You pay the govt when you eat out or visit your hairdresser -- it is a tax on services rendered. Levied on 119 activities. 

Value-Added Tax: State governments levy this on goods at the point of sale, based on the difference between the value of the output and the value of inputs used to produce it. The aim here is to tax a firm only for the value it adds to the inputs, and not the entire input cost. Thus, VAT helps avoid a cascading of taxes. 

TAX REFORMS GOODS AND SERVICES TAX: The proposed GST is expected to streamline the indirect tax regime. It contains all indirect taxes levied on goods, including central and state-level taxes. Billed as an improvement on the VAT system, a uniform GST is expected to create a seamless national market. It could also mean lower taxes. 

DIRECT TAXES CODE: The I-T Act came into effect nearly half a century ago. To account for the new business and activities that have come since then, the government formulated the DTC. It proposes to simplify tax laws and include a new way to calculate taxes on income.
Source : ET

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