Taxation

Taxation system of India
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Taxation In Indian

The government of every country need a revenue to meet expenditure like development and maintenance of  Infrastructure, Security of country, Society welfare works and etc., So the Government have the only limited type of resources of revenue. Taxation is the major resource of the revenue of our country India.

  The portion of the income of the individual or company collected by the government is called the tax. 

In the Indian Taxation, the system has two type of taxes as given below: –

    1. Direct Tax(Income Tax)

    2. Indirect Tax(Goods and Services Tax)

1. Direct Tax(Income Tax): –

It is the Tax which is collected by the government directly from the individual or a company on their total income of the single financial year (F/Y start from 01/04/Every year to 31/03/every year).

Income Tax  - Taxation
Income Tax

 

2. Indirect Tax(Goods and Services Tax): –

It is the Tax which is collected by the government from the manufacturer, wholesalers/dealers, and retails on their total sale of the months. this process of collection of tax is explained as below: –

  • 1st step, Manufacturer collect tax on the sale to the wholesalers/dealers and paid this amount to the government.
  • 2nd step, Wholesalers/dealers collect tax on the sale to the retailer and paid the difference of the amount of tax paid and tax collect to the government.
  • 3rd step, Retailer collect tax on the sale to the consumer(end user) and paid the difference of the amount of tax paid and tax collected to the government.
So, in all three steps government collect the tax from the consumer(end user) indirectly.

Here is an example is given below:-

A is the manufacturer of Electric Bulbs.

A sold goods to B for Rs. 1,000/- Plus Tax Rs. 100/-

B sold goods to C retailer for Rs. 1,200/- Plus Tax Rs 120/-

C sold goods to D(Consumer/Actual Taxpayer) for Rs 1,500/- Plus Tax Rs 150/-

all these transactions are explained below table

Transactions Sale Amount Tax Collected Tax Paid Balance Tax Paid to Govt.
A sold goods to B (Wholesaler)

1,000

100 0

100

B sold goods to C (Retailer)

1,200

120 100

20

C sold goods to D (Consumer/Actual Taxpayer)

1,500

150 120

30

Total Amount of Tax indirectly collected from taxpayer    

 

150

 

 

Indirect Tax  - Taxation
Indirect Tax
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