1. INCOME TAX
P R E P A R E D B Y
P R O F . R A V N E E T K A U E
2. Tax
A tax is a compulsory payment
levied on the persons or companies
to meet the expenditure incurred
on conferring common benefits
upon the people of a country.
3. MAIN
FEATURES
OF TAX
The main characteristic features of a tax are as
follows:
(1) A tax is a compulsory payment to be paid by the
citizens who are liable to pay it. Hence, refusal to
pay a tax is a punishable offence.
(2) There is no direct quid-pro-quo between the tax
payers and the public authority.
(3) A tax is levied to meet public expenditure
incurred by the government in the general interest
of the nation.
(4) A tax is payable regularly and periodically as
determined by the taxing authority.
(5) A tax is a legal correction.
4. Significance of taxation
1. Raising revenue
2. Equal distribution of income
3. Regulation
4. Higher growth
5. Pushing up rates of savings and
investments
5. Objectives of taxation
1. Economic Development
2. Full Employment
3. Price Stability
4. Control of Cyclical Fluctuations
5. Reduction of BOP Difficulties
6. Non-Revenue Objectives
6. Classification of Taxes
Direct and Indirect Taxes
Specific and Ad-Valorem Taxes
Progressive, Proportional and Regressive Taxes
7. Direct Tax and Indirect Tax
1. There are two types of taxes: Direct Tax and Indirect Tax
2. Tax, of which incidence and impact fall on the same person, is known as
Direct Tax, such as Income Tax.
3. On the other hand, tax, of which incidence and impact fall on two different
persons, is known as Indirect Tax, such as GST, etc.
4. It means, in the case of Direct Tax, tax is recovered directly from the
assessee, who ultimately bears such taxes,
5. whereas in the case of Indirect Tax, tax is recovered from the assessee, who
passes such burden to another person & is ultimately borne by consumers of
such goods or services.
8. Direct Tax and Indirect Tax
1. Incidence and impact fall on the same person
2. Assessee, himself bears such taxes. Thus, it
pinches the taxpayer.
3. Levied on income
4. E.g. Income Tax
5. Progressive in nature i.e., higher tax are
levied on person earning higher income and
vice versa.
1. Incidence and impact fall on two different
persons
2. Tax is recovered from the assessee, who
passes such burden to another person. Thus,
it does not pinch the taxpayer.
3. Levied on goods and services. Thus, this type
of tax leads to inflation and have wider base.
4. E.g. GST, Customs Duty, etc.
5. Regressive in nature i.e., all persons will bear
equal wrath of tax on goods or service
consumed by them irrespective of their
ability.
6. Useful tool to promote social welfare by
checking the consumption of harmful goods
or sin goods through higher rate of tax..
9. Union and State List
Following major entries in the respective list enable the legislature to make law on the matter:
Union List (List I) Entry 82 - Taxes on income other than agricultural income i.e. Income-tax
State List (List II) Entry 46 - Taxes on agricultural income
10. ADMINISTRATION OF TAX LAWS
The administrative hierarchy of tax law is as follows
MINISTRY
OF
FINANCE
Department
of revenue
Central Board of
Direct Tax (CBDT
Central Board of
Indirect Taxes &
Customs (CBIC)
11. Income tax Act, 1961 (Amended up to date) The provisions of income
tax extends to the whole of India and became effective from 1/4/1962
(Sec. 1).
The Act contains provisions for -
(a) determination of taxable income;
(b) determination of tax liability;
(c) procedure for assessment, appeals, penalties and prosecutions;
and
(d) powers and duties of Income tax authorities.
