concepts of tax and taxation system in India in detail with examples and respective graphical interference.

1. ECONOMICS
indepthanalysis oftax
Teammembers
Jai Gupta
Isha jain
Anisha arya
Sajal Parashar
Submitted to – Ms. Sumaiya Sayed

2. INTRODUCTION
The word tax comes from a Latin word “taxo ”. It can be defined as “a compulsory
contribution to state revenue, levied by the government on personal income and
business profits or added to the cost of some goods, services, and transactions. ”
In modern economies taxes are the most important source of governmental
revenue. Taxes differ from other sources of revenue in that they are compulsory
levies and are unrequited. While taxes are presumably collected for the welfare
of taxpayers as a whole, the individual taxpayer’s liability is independent of any
specific benefit received.

3. Taxation is the means by which a government or the taxing authority imposes or levies a tax on its
citizens and business entities. From income tax to goods and services tax (GST), taxation applies
to all levels. The Central and State government plays a significant role in determining the taxes in
India. To streamline the process of taxation and ensure transparency in the country, the state and
central governments have undertaken various policy reforms over the last few years
TAXATION
PROGRESSIVE REGRESSIVE PROPOTINAL
POSITIVE CHANGE IN THE
MARGINAL RATE OF TAX
NEGATIVE CHANGE IN THE
MARGINAL RATE OF TAX
NO CHANGE IN THE
MARGINAL RATE OF TAX
NO CHANGE
MARGINAL RATE OF TAX
MARGINAL RATE OF TAX
MARGINAL RATE OF TAX

4. ROLEOFTAXESIN ANECONOMY
The role taxation has to play in an economy cannot be overstressed. However, this can only be attained
when the nation crafts and implements a tax policy which is designed to mitigate the identified
difficulties in her tax system. Efficiency and effectiveness of the tax system as well as accountability of
revenue agencies and the government are all critical if taxation is to contribute to economic growth. It can
be used to encourage or discourage investment in certain sectors of the economy. Tax proceeds are used by
the government to render their traditional functions such as: provision of good roads, maintenance of law
and order, defence against external aggression, regulation of trade and business to ensure social and
economic maintenance.
0
5
10
15
20
25
30
₹5-7.5
LAKH
₹7.5-10
LAKH
₹10 -12.5
LAKH
₹12.5-15
LAKH
₹15 LAKH
& ABOVE
20 20
30 30 30
10
15
20
25
30
INCOME TAX SLAB
OLD TAX % NEW TAX %

5. Typesoftaxes
In the literature of public finance, taxes have been classified in various ways according to who
pays for them, who bears the ultimate burden of them, the extent to which the burden can be
shifted, and various other criteria. As a responsible citizen of the country, it is your duty to pay
the taxes. But it is also equally important to know the different types of taxes implemented in
the country. All the various taxations in India can be broadly classified into two categories-
direct and indirect tax. Let us have a detailed look at the meaning of these two types of taxes
Direct tax indirecttax
Income Tax
Capital Gains Tax Customs Duty
Goods and Services Tax (GST)
INDIVIDUAL

6. In simple words, a direct tax is a tax that you directly pay to the authority imposing the tax. For
instance, income tax is imposed by the government, and you pay it directly to the government. These
taxes cannot be transferred to any other entity or person. There are several acts which govern direct taxes.
In India, CBDT (Central Board of Direct Taxes) which is governed by the Department of Revenue is
responsible for the administration of direct taxes. The department is also involved in planning and
providing inputs to the government regarding the implementation of direct taxes.
direct tax
01
02
03
04
Income Tax
The most common type of direct tax in India
is income tax. It is imposed on the income
you earn in a financial year based on the
income tax slabs of the IT department..
Securities TransactionTax
If you are involved in stock trading, each of
your trade also has a small constituent known
as the securities transaction tax. This tax is
paid irrespective of whether you made money
or not.
Capital GainsTax
Every time you make capital gains, you will
be required to pay capital gains tax. This
capital gain could come from the sale of a
property or from investments.
ESTATETax
Also known as Inheritance tax, it is raised
on an estate or the total value of money
and property that an individual has left
behind after their death

7. ImportanceofDirectTaxes
Direct taxes display the importance of taxes by reducing income equalities with its progressive tax
structure. Citizens are taxed in proportion to their economic circumstances, thereby encouraging
social and economical equality.
In case if there is
monetary inflation, the
government can
increase direct tax rates
so that the goods and
services demand can be
reduced. As the demand
falls, it helps in
condensing inflation.
CurbsInflation Equitable ReducesInequalities
Direct taxes are also
known to be equitable
as the progression
principle is at its
foundation. People with
lower income pay lower
taxes, and people with
higher income pay
higher taxes.
The higher taxes collected
from the rich are used by
the government to launch
newer initiatives for the
poor. The initiatives
provide income sources to
people with lower income,
helping them improve
their living standards.

8. It is a tax levied by the Government on goods and services and not on the income, profit or revenue
of an individual and it can be shifted from one taxpayer to another.. A major difference between
direct and indirect tax is the fact that while direct tax is directly paid to the government, there is
generally an intermediary for collecting indirect taxes from the end-consumer. It is then the
responsibility of the intermediary to pass on the received tax to the government.
Unlike a direct tax, indirect taxes do not depend on the income of an individual.
The CBIC (Central Board of Indirect Taxes and Customs) is mostly responsible for handling indirect
taxes in India
Indirecttax
01
02
03
04
GoodsandServicesTax (GST)
GST subsumed as many as 17 different indirect taxes
in India like Service Tax, Central Excise, State VAT,
and more. It is a single, comprehensive, indirect tax
which is imposed on all the goods and services as per
the tax slabs laid by the GST council.
Customs Duty
When you purchase something that needs to be
imported from a foreign country, you are required to
pay customs duty on it. Irrespective of whether the
product has come to India by air, land, or sea
VALUEADDED TAX( VAT)
A VAT is a type of consumption tax imposed on
products whenever its value increases throughout
the supply chain. While GST has mostly
eliminated VAT, it is still imposed on some
products such as items that contain alcohol.
Entertainmenttax
Charged only by the respective state
governments, this tax is levied on all
financial transactions related to
entertainment
INDIVIDUAL
BUSINESS
GOVERMENT

9. ImportanceofindirectTaxes
The importance of taxes for the government when it comes to indirect taxation is that they are an
automatic function that accompany the buying and selling of goods and services across the country.
They are therefore easy to collect and convenient for both taxpayers and the tax collection
authorities. They also help broaden the country’s net of tax liabilities, gathering contributions from
those sections of society that are otherwise exempted from direct tax.
It is essential for the
country that every
individual contributes
towards its development.
As the poor are often
exempt from paying
direct taxes, the indirect
taxes ensure that even
poor contribute towards
nation-building.
PoorContributesToo Convenience ThecollectionisEasy
Unlike direct taxes which are
generally paid in a lump-sum,
indirect taxes like GST are
paid in small amounts. When
you purchase a product or
service, a small amount of
GST is already included in the
price, and this makes its
payment more convenient
for the taxpayers.
If you want to know what is the
difference between direct and
indirect tax, one of the biggest
of them is how they are paid.
Unlike direct taxes, there are
no documents or complex
procedures involved in paying
indirect taxes. You are required
to pay the tax right when you
purchase a product or service.

10. difference betweendirectandindirecttax
context directtax Indirecttax
Imposedon Income and profits All the goods and services
Whopays Individuals and businesses End-consumers
Howmuch Depends on income and profits Same for everyone
TaxEvasion Possible Not Possible
nature Progressive Regressive

11. TaxavoidanceandTaxevasion
11
Tax Evasion and Tax Avoidance are two techniques which are used and applied by many people for
the purpose of reducing their tax liability. These actions are performed only after consulting an
expert in the field of tax. Tax avoidance is a completely legal procedure while Tax Evasion is
considered to be crime in the whole world.
Minimizing oftaxes
Example
Using legitimate tax deductions,
setting up tax deferral plans,
taking tax credits
Notpaying taxes
Example
Not reporting income, reporting
more expenses, not paying taxes
owed correctly
Taxavoidance
Taxevasion

12. Taxavoidance
Tax avoidance is the use of legal methods of reducing taxable income or tax owed. Claiming allowed
tax deductions and tax credits are common tactics, as is investing in tax-advantaged accounts such
as IRAs and 401(k)s. In simple terms, legal method of avoiding the tax where you can find the legal
ways to avoid paying illegitimate tax provided in the tax code is called tax avoidance.
01
Theory
03
Theory
It involves the legal
exploitation of tax laws to
one’s own advantages
Every attempt by legal means to
prevent or reduce tax liability which
would otherwise be incurred, by
taking advantage of some provisions
or lack of provisions
An arrangement entered into solely
by or primarily for the purpose of
obtaining a tax advantages.
Tax avoidance leads to the
deferment of tax liability.
characteristics

13. Tax loophole
Tax Loopholes these are ways to find
the holes where the tax savvy can
reduce the tax without breaking the
law. it's a clause in the tax laws that
people creates a hole people can go
through to reduce their taxes
Tax shield
Tax shield is a reduction in taxable
income for an individual or corporation
achieved through claiming allowable
deductions such as mortgage interest,
medical expenses, charitable
donations, amortization, and depreciation.
Typesoftaxavoidance

14. TaxEVASION
Tax evasion is a crime in which an individual or a business entity intentionally underpays or hide
their certain amount of income in order to save more amount of taxes. This method is certainly
illegal in all the countries. Tax Evasion is basically non-payment of taxes by means of not reporting
all taxable income, or by taking not allowed deductions. It originated in England between 1920 -1925.
If the person fails to file income
tax, the assessing officer can impose
a penalty of INR 5,000 or more.
The assessing officer can as per Section
221(1) declare the taxpayer as a defaulter
and impose a fine that does not exceed
the tax in arrears.
Failure to do so will incur a penalty of
INR 1lakh or more. If any document is not
furnished or attached, a penalty of 2% of
the transaction’s value is levied
NOT FILINGINCOME TAXRETURN Failure to PayTax asSelf-Assessment
Failure to GetAccounts Audited
Under section 271(C) of Income Tax
Act, there is a 100% to 300% penalty
of the tax evaded if someone is
caught concealing tax.
Concealment ofIncome
Penaltiesandjail fortaxevasionin India

15. Examplesoftaxevasion
Tax evasion doesn’t require elaborate schemes or dark-alley meetings. Here
are a few examples of how it can happen more easily than you'd think
Paying the nanny
under the table
Ignoring overseas
income
Banking on bitcoin
Not reporting income from
an all-cash business or
illegal activities
Trust Fund Payers and
Tax Evasion

16. Differencebetweentaxavoidanceandtaxevasion
basis TAXAVOIDANCE TAXEVASION
TYPEOFACT/NATURE It is legal in nature It is illegal in nature
TYPES Loopholes and Loop shields
(explanation)
Trust fraud income can be considered as a tax evasion
PURPOSE To minimize taxes in a legitimate
manner
To avoid paying taxes.
WHENITISDONE Before the tax liability After the tax liability
WHATISIT? Hedging of tax Concealment of tax
PuNISHMENT Imprisonment if it violates the
guidelines.
Imprisonment
Judicialperception Mcdowell’s Case, IRC v. Duke of
Westminster
Union of India v. Playworld Electronics Pvt. Ltd. &
endash, Calcutta Chromotype Ltd. V. Collector of C.
Ex., Calcutta & endash
Key
differences

17. THANKS
Thanking ma’am for giving us this
opportunity to work on this beautiful
assignment