DIRECT TAX - ECONOMY
News: Tax
collections cross ₹12 lakh crore, 87% of target met
What's in the news?
● India’s
net direct tax collections stood at ₹12.31 lakh crore as on January 11, accounting
for almost 87% of the target for 2022-23 and reflecting a 19.55% growth over
the year-earlier period, asserting that tax revenues continued to register
‘steady growth’.
What is meant by direct tax?
● The
tax that is levied by the Government
directly on the individuals or corporations are called direct taxes.
● The
incidence and impact of the direct tax
fall on the same person.
● They
are progressive in nature.
● They
are not related to inflation changes.
● Example:
Income Tax, Corporation Tax and Wealth Tax.
Income Tax:
● Income
tax is levied on the income of individuals,
Hindu undivided families, unregistered firms and other associations of people.
● In
India, the nature of income tax is progressive.
● For
taxation purposes, income from all
sources is added and taxed as per the income tax slabs of the individual.
Corporation Tax:
● Corporation
tax levied on the income of corporate
firms and corporations.
● For
taxation purposes, a company is treated as a separate entity and thus must pay
a separate tax different from the personal income tax of its owner.
● Companies
both public and private which are registered in India under the Companies Act 1956 are liable to pay
corporate tax.
● The
Government divides it between two sub-categories such as follows.
● Domestic company [Section
2(22A)]:
○ An
Indian company (i.e. a company formed and registered under the Companies
Act,1956) or any other company which, in respect of its income liable to tax,
under the Income Tax Act, would have to pay the tax.
○ A
domestic company may be a public company or a private company.
● Foreign company [Section
2(23A)]:
○ A
company whose control and management are situated wholly outside India, and
which has not made the prescribed arrangements for declaration and payment of
dividends within India.
○ The government has
reduced the corporate tax rate from 30% to 22% for existing companies, and from
25% to 15% for new manufacturing companies.