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.