Rahul Godbole

Tax is the price which we pay for the civilized society. The government has the mechanism to collect tax and utilizes the funds for various purposes. Broadly, taxes have been classified as Direct Taxes and Indirect Taxes.

Direct Tax is a tax where tax is paid directly by the person e.g. Income Tax, Wealth Tax etc., whereas Indirect Tax is a tax where the tax is paid indirectly e.g. Goods and Services Tax, Custom Duty, VAT etc.

Income tax is an annual tax on the taxable income of a person. Income of a person is computed under five heads. These are:

• 1. Salaries
• 2. Income from House Property
• 3. Profit & Gains of Business or Profession
• 4. Capital Gains
• 5. Income from Other Sources

There are various deductions and exemptions available for the computation of income and tax liability. E.g. Investments in PPF, Certain Mutual Funds, Payment of Insurance Premiums etc. These amounts are deducted from gross income of an Individual & HUF under Section 80C.

The provisions of computation of income, deductions, exemptions etc. are specified in the Income Tax Act, 1961. Tax is computed in different Slabs given in the Finance Act of every year. The presentation of proposed slabs in parliament is known as the Budget.

India has adopted Goods and Service Tax in the year 2017. It was a revolutionary change in the tax system of India. It is a uniform tax system in which various central and state taxes are clubbed, and the cascading effect of taxation is removed.

It's a comprehensive, technology-driven, value-added, destination-based, and transparent tax. The CGST, SGST, and IGST are main components of GST. The GST has reduced the number of rates at which taxes are charged and collected. Certain items are excluded or exempt from GST.

Valued Added Tax (VAT) is a simple and transparent system of taxation. India adopted VAT in the 90s. Avoidance of double taxation and an increase in the tax base are two major benefits of VAT.

India adopted State Level VAT in Sales Taxation where credit is given for VAT Paid on Purchases while Paying Tax collected on Sales. VAT is collected at every step in the Production & Supply Chain. After the introduction of GST in 2017, the scope of VAT is limited to very few items.

Custom duty is a duty levied on imports into and exports out of India. There are various types of custom duties e.g. Basic Custom Duty, Special Custom Duty, Additional Custom Duty, Anti Dumping Duty, Safeguard Duty etc.