Income Tax System in India and types of Taxes

Income Tax System

Income Tax System in which Income tax means compulsory contribution by a citizen or organization to the government. Government has made different bodies to collect tax from people. It took place at three different levels- central level, State level and local level. In which distribution of tax between state and centre has clearly mentioned in the constitution of India. And to rationalize it from time to time government every time constitutes the Finance Commission.

The Income-tax system is divided into two parts
Tax by Central Government and Tax by State Government

Central government Tax Includes Custom Duty, Income Tax and Corporate Tax.

State Tax includes Excise Tax, Sales Tax, Vat, and Entertainment Tax. But since 2017 all these taxes has been converted into a single tax known as GST (Goods and Services Tax).

Progressive tax: A tax that takes away a higher proportion of one’s income as the income rises is known as a progressive tax.

Important Taxes Imposed by the Indian Government under the Income tax System

1. Tax on Income and Wealth: The central government imposes different types of tax on income and wealth. These taxes are Income Tax, Wealth Tax, Gift Tax, and Corporate Tax. Out of which Income and Wealth Tax are important from the revenue point of view.

2. Personal Income Tax: Personal Income Tax is generally imposed on an individual combined Hindu Families. Or the total income of people of any other communities.

3. Corporate Tax: Corporate Tax is imposed on registered companies and corporations. The rate of corporate tax on all companies is equal. However, various types of rebates and exemptions are provided by governments.

4. Custom Duties: Central Government imposes import duty and export duty both on goods is known as custom duties.

5. Excise duties: Excise duties are commodity tax as it is imposed on the production of an item and it has no relevance with its sale.

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