Indian citizens are required to pay mandatory financial charges to the government. The government uses this money to work on various projects, build infrastructure, and provide social welfare to the people.
A business tax in India is divided into two types: direct tax and indirect tax. Find out more about them below.
How do direct taxes work?
You pay direct taxes to the government when you pay them directly. A company or individual is directly taxed by direct taxes. Third parties cannot be held liable for the debt. Revenue’s functioning is overseen by the Central Board of Direct Taxes. With the help of various acts that govern various aspects of direct taxes, CBDT assists the Revenue department in performing its duties. With certain exceptions, you must pay the Direct Tax on a periodic basis.
Types of Direct taxes
· Income tax
Financial earnings such as salary, profit, commissions, fees, etc., will be subject to income tax. In addition to tax slabs, taxable income, tax deducted at source (TDS), and reduction of taxable income, income tax comes in many forms. Every individual and company in India is subject to income tax. The government provides different slabs for individuals and business organizations based on their tax status. Each year, income tax must be filed.
· Professional Tax
Taxes are direct. Whether you earn an income from salary or from practicing a profession, you have to pay professional tax. There are different rates and methods of collection in different states. This tax is collected from employees and paid to the government by the entity.
· Capital Gains Tax
Capital gains are earned from investments such as property, gold, mutual funds, fixed deposits, bonds, and government certificates. It can either be a business tax or an individual tax. Long-term capital gains and short-term capital gains are two types of capital gains. A short-term investment is one that lasts less than 36 months, and a long-term investment is one that lasts more than 36 months. There are different tax rates for each term. Tax rates are lower the longer the capital period.
· Wealth Tax
Depending on the market value of your properties, you pay the wealth tax yearly. A person or company must pay wealth tax regardless of whether they earn income from their property. Rental properties are exempt from taxes if they are rented for more than 300 days. The wealth tax does not apply to property used for business or professional purposes.
· Estate Tax
An individual’s legal heir is responsible for paying tax on the wealth inherited after his death. Inheritance tax is also known as estate tax.
· Corporate Tax
This tax is payable by companies registered under the 1956 Companies Act. Profits earned in one year are subject to corporate tax. There are many clauses in the Indian income tax act that provide tax benefits and rebates. Depending on the rate of tax, there are different slabs. The corporate tax preview applies to international companies with branches in India. The following are a few taxes that are included in the corporate tax.
· Securities Transaction Tax (STT)
The income generated from the sale of shares and securities is taxable. It must be declared in tax planning.
· Dividend Distribution Tax (DDT)
A dividend or profit share declared by an Indian company to its investors will be taxed. Dividend Distribution Tax is what it is called. Dividend Distribution Tax does not apply to foreign companies.
· Fringe Benefits Tax
Employees of the company receive fringe benefits. Fringe benefits are taxable under the Fringe Benefits Tax. Among them are employer-related expenses for travel (LTA), employee welfare, accommodation, and entertainment. An employer’s regular commute or commute-related expenses. Contribution by the employer to a certified retirement fund. Plans for employee stock options (ESOPs).
· Minimum Alternate Tax (MAT)
CBDT levies MAT on zero-tax companies that prepare accounts under the Companies Act.
- Calculate Your Corporate Taxes in India
- Prepare and Submit Your Income Tax Return
- Tax benefits of National Savings Certificates