Taxation refers to the act of a taxing authority actually
levying tax. Taxation as a term applies to all types of
taxes from income to gift to a estate taxes. It is usually
refer to as an act any revenue collected is usually called
History of Taxation
It is a matter of general belief that taxation are of
recent origin but in ancient time also taxes were levied
in some form on sale and purchase of merchandise or
livestock. It was all over world. In India Kautilya’s
Arthshastra, which deals with he system of Taxation in
a real elaborate & planned manner.
It was only for the good of his subjects that he
collected taxes from them, just as Sun draws moisture
from the Earth to give it back a thousands fold.
Kalidas in Raghuvansh eulogizing King Dalip
Tax is imposition of financial charge or other levying
upon a taxpayer by Government or other functional
equivalent of the state.
The organisational history of Income-tax Department
starts in the year 1922.In 1961 Direct Tax Advisory
Committee set up- Direct Taxes Administrative
Enquiry Committee constituted & Income Tax Act
, 1961 came into existence which extends to whole
india & became effective from 1st april 1962.
Every year a Budget is presented before Parliament by
Finance Minister. Most important component of
Budget is Finance Bill, which contains amendments
which are sought to be made in the area of Direct tax
levied by Central Government.
The taxes whose burden falls directly on taxpayers are
e.g.-Income tax, Wealth tax, Property tax etc.
Indirect taxes are the taxes in which the burden of
paying tax is shifted through a change in price.
e.g.-Custom Duty, Excise Duty, Sales tax, Service tax
It is a tax on the income of an Individual or Entity
levied by Government. It was introduce in
1860, discontinued in 1873 & reintroduced in 1880.
It is levied on the
income of individual,
undivided family &
other association of
It is levied on income
Personal Income Tax
Income from all the sources are considered.
Certain rebates, Deductions, Expenditures, Insurances
are not consider for levy tax.
It is progressive i.e. if income increases tax rate also
It is levied on the basis of slabs.
Corporate Income Tax
Rationale for Corporate Tax is that a Joint Stock
Company has a separate Entity so taxed separately.
A Corporation Pays taxes on behalf of income of
Shareholders on Dividends paid to them, & each
Shareholder get a Credit till 1960-61. Now Share
holders don’t get credit because Entity treat as
Corporation pays on flat tax rates & it is different for
Indian companies &Foreign companies.
Corporate Income Tax
Type of Company
Total Income More
than INR 10 million
Total Income Less than
INR 10 million
30% ⁺ surcharge ⁺
30% ⁺ Education cess
40% ⁺ surcharge ⁺
40% ⁺ Education cess
Custom Duty & Octroi
Custom Duty is levied on Import & Export. From
revenue’s point of view, importance of Export Duty is
Since 1991 Custom Duty structure was pruned & now
maximum rate of Custom Duty is 10%.
Octroi is a tax on goods entering in to Municipality or
any other jurisdiction for use, consumption or sale.
Excise Duty is a tax charged on goods produced within
the country. This is opposite to Custom Duty . Its
another name is CENVAT(Central Value Added Tax).
Anti Dumping Duty
Dumping is said to occur when the goods are exported
by a country to another at a price lower than its normal
value. This is an unfair trade practice which can have a
distortive effect on international trade. In order to
rectify this situation Central Government imposes it.
This is the tax imposed on the sales of movable goods.
Sale tax on inter state sale is levied by Union
Government & on intra state sale by state government.
The tax on paid services you take is Service Tax. Over
past few years, it is expanded to cover new services.
Few of the major service which comes under vicinity of
service tax are telephone, tour
operator, architect, advertising, health center, banking
& financial services etc.
Value Added Tax
The part of Sales Tax imposed by State government is
called Value Added Tax. It covers more than 220 items.
VAT rates vary based on nature of item &state.
Advantage of Taxes
It helps to the Government in its revenue which is
used to facilitate people of a country.
It helps to control inflation.
It restrict Government to take loan from World Bank.
It utilizes public money in social walefare.
Disadvantage of Taxes
It restrict common people to get extra happiness at
If Government misuse tax we don’t have any control on