Direct Tax Collection in India

Source: The Hindu
GS III: Economics

Overview

1. News in Brief
2. How it helps

Why in the News?

The net Direct Tax collection is 80.61% of the total Budget Estimates of Direct Taxes for F.Y. 2023-24.

News in Brief

• India’s net direct tax collections touched ₹14.7 lakh crore by January 10.
• This meeting over four-fifths of this year’s target and reflecting a growth of 19.4% over the same period of 2022-23.
• The Central Board of Direct Taxes said that provisional direct tax collections continue to register ‘steady growth’ with gross collections rising 16.77% to ₹17.18 lakh crore.
• It led by a 26.11% rise in Personal Income Tax (PIT) inflows.
• Corporate Income Tax or CIT collections grew at a relatively muted pace of 8.32%.

Tax in India

• Direct tax is the tax that is paid directly to the government by the person or company on whom it is levied.
  • Income tax, wealth tax, corporation tax, and property tax are some examples of direct tax.
• Indirect taxes are those that are collected by intermediaries from individuals and corporations who bear the burden of the tax and passed on to the government.
  • Goods and Services Tax (GST) is an example of indirect tax.
  • Corporation tax forms a large chunk of the government’s tax revenue.

Major Taxes

• Income Tax:
  • Governed by the Income Tax Act, individuals and businesses are liable to pay income tax on their earnings.
  • Income tax rates vary based on the income slab in which an individual or entity falls.
  • The income tax system includes provisions for deductions, exemptions, and rebates.
• Goods and Services Tax (GST):
  • GST is a comprehensive indirect tax that replaced various indirect taxes at the central and state levels.
  • It is levied on the supply of goods and services and is administered by the Goods and Services Tax Council.
  • GST is categorized into Central GST (CGST), State GST (SGST), and Integrated GST (IGST).
• Corporate Tax:
  • Corporates are subject to corporate income tax, which is applicable to the profits earned by companies.
  • The rate may vary based on the type of company and its turnover.
• Customs Duty:
  • Customs duty is imposed on goods imported into India.
  • The rates and regulations are governed by the Customs Act.
• Excise Duty:
  • Excise duty is a tax levied on the production or manufacture of goods in India.
  • However, with the implementation of GST, excise duty has been subsumed into the GST regime.
• Service Tax:
  • Service tax was replaced by GST, and now services are taxed under the GST framework.
• Securities Transaction Tax (STT):
  • Applicable to transactions in the securities market, STT is levied on the purchase and sale of securities.
• Property Tax:
  • Property tax is imposed by local municipal bodies on the value of a property.
• Wealth Tax:
  • Wealth tax was abolished in the Finance Act, 2015, and is no longer applicable.
• Professional Tax:
  • Levied by state governments on the income earned by professionals.

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