This document discusses various taxes in India including income tax, corporation tax, wealth tax, securities transaction tax (STT), and long-term capital gains tax (LTCG). It notes that India's tax-GDP ratio has remained constant even as the economy has grown. Income tax applies to individual and business incomes but has a narrow base and high rates that lead to evasion. Corporation tax rates have recently been reduced for smaller companies. Wealth tax was abolished in 2016. STT is paid on stock transactions while LTCG tax of 10% was introduced in 2018 on long-term capital gains over 1 lakh rupees.

1. TAX REVENUE

2. TAX BURDEN
 Calculated by finding out the tax-GDP ratio
 Increased over the years
 Even though India broke away from the Hindu rate of growth, the ratio
remained constant (whereas, an increase was expected)

3. TAXES ON INCOME AND WEALTH
 Income tax: Levied on the incomes of individuals, Hindu families, unregistered firms and other
associations of people
 Income from all sources are added
 Progressive income tax
 Extraordinarily high tax rates leads to tax evasion and black money
 Chelliah Committee favored significant tax reductions at all levels
 Laffer effect

4.  Measure of redistribution
 Income tax should have a wide base
 However, in India the base is very narrow
 Many exceptions: savings in Government sponsored saving schemes, fringe benefits like
employer provided housing, charitable contributions to specified charitable trusts

5. CORPORATION TAX
 Levied on incomes of registered companies and corporations
 The Union Budget 2019-20 reduced the Corporation tax rate to 25% for companies with less
than 400 rupees crore turnover.
 This brought down the tax rate for as many as 99.3% of the companies
 Certain provisions provide incentives to investors, others nullify their effect
 Companies take undue advantage of rebates and exemptions
 Chelliah Committee recommended elimination of most of the incentives except those meant
for promoting savings and exports

6. TAXES ON WEALTH AND CAPITAL
 Wealth tax
 First introduced in May, 1957 on the recommendations of Kaldor
 Levied on the excess of net wealth over exemption of individuals, joint Hindu families and
companies
 Exceptions: agricultural land and balance of PF and life insurance
 Abolished in Union budget of 2016-17

7. STT TAX
Securities Transaction Tax (STT)
 Direct tax payable on every purchase or sale of securities that are listed on the Indian Stock
exchanges
 Shares, derivatives, equity-oriented mutual funds
 Not applicable on off-market transactions, commodity or currency transactions
 Tax gets added to the price of the stock at the time of the transaction

8. LTCG TAX (LONG-TERM CAPITAL GAINS TAX)
 Introduced in Union Budget of 2018-19
 Earlier exemption had two negative effects
1. Incentivized investments in financial instruments and thereby disincentivised investment in
manufacturing
2. Resulted in significant tax base erosion
 Tax rate is 10% on LTCG exceeding 1 lakh rupees

9. TRENDS
 Refer to pdf tax revenue and trends in revenue receipts