Classification of Tax, Important Definitions

1. DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 1
Mr. K. GANESHA MOORTHY
Assistant Professor,
Department of Commerce (Corporate Secretaryship),
Ayya Nadar Janaki Ammal College, Sivakasi.
Classification of Taxes and
Important Definitions

2. DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 2
GST

3. Classification of Taxes
Taxes are classified into two i.e., Direct Tax and Indirect
Tax.
Direct Tax
 Direct Taxes at Central level
 Direct taxes at State level
 Direct Taxes at local level
Indirect Tax
 Central Excise Duty
 Customs Duty
 Goods and Services Tax
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 3

4. Direct Taxes at Central level
 Income Tax
Income tax is payable by individuals, HUF, AOP, BOI,
Co-operative Societies, Partnership Firms, Companies etc.,
Income tax is a major source of income to the central
government.
 Corporation Tax
Income tax is paid by limited companies is called
Corporation tax or Corporate tax or Company tax. It is
levied on the profits made by the companies as per the rates
given in the Finance Act passed by Parliament annualy.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 4

5.  Dividend Tax
Limited tax in India are required to pay dividend tax at
10% on the dividend paid by them to their shareholders. This
tax is in addition to the corporation income tax.
 Wealth Tax
It is imposed on the wealth or assets held by individuals.
It is levied every year on the total value of person’s property or
wealth. It is payable at 1% on the net wealth exceeding rupees
15 lakhs.
 Gift Tax
Any gift received with or without consideration in excess
of Rs.50,000 in a financial year will be added to your income
from other sources and taxed according to your slab rate.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 5

6. II. Direct Taxes at State Level
 Land Revenue
Land revenue is purported to be the state’s share in the
output from land. In India, land revenue is abolished in
some states and the rates varied from state to state.
 Agricultural Income Tax
It is defined as a tax on income earned from
agriculture or other related activities. Indian constitution
specially provides for levy of agricultural income tax b the
state governments. However, no state government has
actually passed legislation to tax agricultural incomes.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 6

7.  Professional Tax
This is a tax on professionals, payable annually. State
government fixes a specified amount to be aid by each
category of professionals. Each professionals pays the
professional tax as a lumpsum, one time payment per year.
It may be paid in two instalments.
In case the professionals working as salaried
employees, the employer deducts the amount of tax in two
instalments form the salary of employees.
III. Directs Taxes at Local Government
Local givernments like Municiaplities, Panchayats
levy some taxes like house property tax, water tax etc.,
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 7

8. Indirect Tax
 Central Excise Duty
An Excise duty is a tax on goods produced or
manufactured within the country either in the process of their
manufacture or before their sale to customers. It is levied on the
commodities like Beverages, Sugar, Petrol, Tobacco, Cloths
etc.,
 Customs Duty
custom duties are taxes imposed on goods as they cross a
national boundary. They are levied on goods as they imported
into India from other countries (Import duties) and also on
goods exported from India to other countries (Export duties).
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 8

9.  Goods and Services Tax
The Good and Services Tax (GST) is a tax levied on
most goods and services sold for consumption. GST is paid
by consumers but it is remitted to the government by the
business selling goods and services. In effect, GST provides
revenue for the government, borne by the consumers.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 9

10. DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 10
Differences between Direct and Indirect Taxes
Basis Direct Tax Indirect Tax
1. Nature Progressive in nature Proportional in nature
2. Equitability Ability to pay is taken into account,
thus satisfying the equity principle
Ignores the equity principle as it does not
distinguish between the tax payers
3. Shiftability Shifting is not easy and the tax payer
has to bear the tax
The tax can be shifted to other
individuals
4. Incidence Incidence of tax is directly on the tax
payer
Incidence is on traders or manufacturer,
but shifted to buyers of goods
5.Point of
levy
Levy is on persons who possess
property or earn income
Levy is on persons who spend their
income or incur expenditure

11. DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 11
Differences between Direct and Indirect Taxes
Basis Direct Tax Indirect Tax
6. Burden of
tax
The rich and wealthy usually bear
the burden
Burden is proportionate but relatively
heavy on the poor
7. Impact on
cost and
prices
Commodity prices are not affected Increases cost and prices of goods and
services
8. Scope for
tax evasion
Scope for evasion is high through
falsification of accounts and
suppression of income
Scope for evasion is low as the tax forms
part of product or service price

12. Important Definitions
Assessment Year
The tax payer’s income of the previous year is
assessed to tax in the assessment year at the rates prescribed
by the Finance Act for the assessment year.
Assessment year means the period of twelve months
beginning from 1st April every year and ending on 31st
March of the immediately following year.
The current assessment year 2020 – 2021.
It commences on 1st April 2020 and will end on 31st March
2021.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 12

13. Previous Year
Income earned in a year is taxable in the next year.
The year in which income is earned is known as previous
year.
Previous year means the financial year immediately
preceding the assessment year. A tax payer’s income of the
previous year is assessed to tax in the assessment year.
The current assessment year 2020 – 2021, the relevant
previous year will be the financial year 2019 – 2020. i.e., 1st
April 2019 to 31st March 2020.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 13

14. Person
According to Sec 2 (31) the term person includes the
following:
 An individual
 An Hindu Undivided Family
 A Company
 A Firm
 An Association of Persons (AOP)
 Body of Individuals (BOI)
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 14

15. Assessee
Assessee means a person by whom any tax or other
sum of money is payable under this act, and includes –
i. Every person in respect of whom any proceedings
under this act has been taken for assessment of his income.
ii. Every person who is deemed to be an assesse under
any provision of this act.
iii. Every person who is deemed to be an assesse in
default under any provision of this act.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 15

16. Income
Income is a periodical monetary return with some sort
of regularity. The word ‘Income’ covers receipts in the
shape of money or money’s worth which arise with certain
regularity.
However, all receipts do not form the basis of taxation
under the Act.
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 16

17. Thank You
DIRECT TAX UNIT – I TAXATION
Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 17