Taxation

Taxation Feature image-min

Taxation In India

The government of every country need 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 types 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: –

  1. The Manufacturer shall collect the amount of tax(GST) on the sale of goods from the wholesalers/dealers and then at the end of the month, he shall pay this amount to the government.
  2. The Wholesalers/dealers shall collect tax on the sale of goods from the retailer and then at the end of the month, he shall pay that balance amount of tax to the government.
  3. The Retailer shall collect tax on the sale of goods from the consumer(end-user) and then at the end of the month, he also shall pay that balance amount of tax to the government.

Note: – The balance amount of tax is that amount which is left after deduction of the amount of tax paid from the amount of tax collected.

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 the 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 the taxpayer    

 

150

Indirect Tax  - Taxation
Indirect Tax