Why is Finance Act important in Indian tax system?
Every year, the Act lays down in detail all the associated provisions related to Income Tax in the country. Since this applies to a large number of taxpayers, it is considered one of the most important elements. The Finance Act is responsible for laying down the tax slabs that applies to taxpayers.
A Quick Note on the Importance of Income Tax
In India, Income Tax* is one of the sources of revenue for the government. It helps them manage the costs associated with civil operations, including running and maintaining infrastructure, government units, social development, and other government expenses.
Citizens are taxed in proportion to their economic circ*mstances, thereby encouraging social and economical equality. Moreover, with direct taxes, taxpayers remain aware of how much tax they can be expected to pay in a financial year and prepare well in advance.
The main feature of the Indian tax structure is the existence of a multiplicity of taxes. Union government taxes and state government taxes, both exist, and the tax structure includes both direct and indirect taxes. 2. The indirect taxes hold a large share in our Indian tax structure.
Proportional - A proportional tax* system is ideal because all taxpayers pay the same share of their earnings in taxes*.
The Income Tax Act was enacted in the year 1961 and is the statute under which everything related to taxation is listed.
The Income Tax Act of 1961 is a comprehensive statute that sets the rules and regulations that govern taxation in India. The Income Tax Act contains a total of 23 chapters and 298 sections according to the official website of the Income Tax Department of India.
India's tax system is plagued by tax evasion and the existence of a significant black economy. High tax rates, complex regulations, and weak enforcement mechanisms contribute to tax evasion practices.
Reliance Industries Limited (RIL) is a Fortune 500 company and India's largest private sector corporation. RIL paid the highest tax with a sum of Rs 20713 crore in taxes during the financial year 2022-23.
The Indian tax system is well structured and has a three-tier federal structure. The tax structure consists of the central government, state governments, and local municipal bodies. When it comes to taxes, there are two types of taxes in India - Direct and Indirect tax.
What is the answer to the Indian tax system?
The Indian Tax system is a three-tier federal structure where central, state and local municipal bodies collect taxes to fund their spending and various other necessary expenditures. Indian tax structure comprises two types of taxes namely, direct tax and indirect tax.
Net direct tax collection in Maharashtra stood at Rs 6.14 lakh crore in 2022-23, the highest by any state, followed by Rs 2.12 lakh crore collected in Delhi, Rs 2.05 lakh crore in Karnataka and Rs 1.07 lakh crore collected in Tamil Nadu, Minister of State for Finance Pankaj Chaudhary said in a written reply to a ...
The major sources of revenue for the Indian government are the GST and income tax. Both sources of taxation account for roughly 90 per cent of the government's overall revenue. GST contributed about 57 per cent of overall tax revenue in 2021-22.
Formalising the economy by bringing these businesses and workers under the tax net can increase the tax base. This can be achieved by providing incentives for businesses to register themselves and comply with tax laws, and by simplifying tax laws to make compliance easier.
The maximum tax rate in India is almost at par with other countries across the world. However, the basic exemption limits, deductions, rebates, etc., vary for each country. The brunt of personal tax rates is a direct cost hit to an individual's income.
The taxation system in India is such that the taxes are levied by the Central Government and the State Governments. Some minor taxes are also levied by the local authorities such as the Municipality and the Local Governments.
Individuals below 60 years of age with an income above Rs. 2.50 lakhs must pay tax on the excess amount. The tax-free limit for senior citizens (60 to 80 years old) is Rs. 3 lakhs; for super senior citizens (above 80 years old), it is Rs.
In India ,this tax was introduced for the first time in 1860,by Sir James Wilson in order to meet the losses sustained by the Government on account of the Military Mutiny of 1857. Thereafter ,several amendments were made in it from time to time. In 1886,a separate Income tax act was passed.
If your annual income is more than ₹2.5 lakhs per annum, you must file Income tax* returns in our country. This limit is stretched to ₹3 lakhs for senior citizens above the age of 60. Additionally, people above the age of 75 can get exemptions from paying income tax in India.
The Income-tax Act, 1961 is the charging statute of Income Tax in India. It provides for levy, administration, collection and recovery of Income Tax. The Government of India brought a draft statute called the "Direct Taxes Code" intended to replace the Income Tax Act, 1961 and the Wealth Tax Act, 1957.
When was Income Tax Act established in India?
The word tax has come from the LATIN term “taxare”, which means charge, and the Income Tax Act was enacted in the year 1961 along with a number of rules and provisions which not only help taxpayers pay their taxes but also help them file their tax returns and avail of tax refunds, if applicable.
Some of the main shortcomings of the Indian tax system include: Complexity: The Indian tax system is complex, with multiple tax laws and regulations that are difficult for taxpayers to understand and comply with. This complexity often leads to confusion and non-compliance.
"Income levels are low, so even if we are a population of 1.2 billion, there are not that many as a proportion of the population who can pay," Bhusnurmath says. Tens of millions of farmers are also exempt.
Levying a federal income tax became a key goal for many progressive groups, the key argument being that it was fairer for wealthy individuals to pay for the taxes and tariffs that had been largely obliged from the middle class and the poor in society.
Taxes provide revenue for federal, local, and state governments to fund essential services--defense, highways, police, a justice system--that benefit all citizens, who could not provide such services very effectively for themselves.
