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### Note 1: Direct Taxes in India
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tags: #Economy #UPSC #DirectTax
aliases: [Direct Taxation, Income Tax, CBDT]Definition and Mechanism Direct taxes are those imposed directly on individuals or entities and are paid directly to the government. In this system, both the legal liability (Impact) and the financial burden (Incidence) fall on the same person. These taxes are non-transferable; the person or firm on whom the tax is levied must bear the cost and cannot ask another to pay it.
Key Direct Taxes in India
- Personal Income Tax: A tax on the income earned by individuals, HUFs, and partnership firms.
- Corporate Tax: A direct tax imposed on the net profits earned by corporations or businesses.
- Capital Gains Tax: Levied on the profits accumulated from the sale of capital assets like real estate or stocks.
- Securities Transaction Tax (STT): A tax on every purchase and sale of securities listed on recognized stock exchanges, intended to curb evasion of capital gains tax.
[!INFO] Progressive Nature of Direct Taxes Direct taxes in India are Progressive in nature. This means the tax rate increases as the taxable income or amount rises, following the “ability to pay” principle. For example, higher income slabs are subject to higher rates (e.g., 20% or 30%), ensuring that wealthier individuals contribute a larger proportion of their earnings compared to those with lower incomes.
Administrative Authority The task of administration and collection of direct taxes is entrusted to the Central Board of Direct Taxes (CBDT), which is part of the Department of Revenue under the Ministry of Finance.
Related: [[Taxation in India MOC]], [[Indirect Taxes in India]]
Note 2: Indirect Taxes in India
tags: #Economy #GST #IndirectTax
aliases: [Indirect Taxation, GST, CBIC]Definition and Shifting of Burden Indirect taxes are charged on persons who purchase goods and services and are paid indirectly to the government through intermediaries like retailers. These taxes are transferable in nature; while the shopkeeper or business has the legal liability (Impact) to pay the government, the economic burden (Incidence) is shifted to the final consumer via the retail price.
Details of Key Indirect Taxes
- Goods and Services Tax (GST): A comprehensive, multi-stage, destination-based tax levied on every value addition.
- CGST (Central GST): Collected by the Centre on intra-state sales.
- SGST (State GST): Collected by the States on intra-state sales.
- IGST (Integrated GST): Collected by the Centre on inter-state supplies and distributed between the Union and States.
- Customs Duty: Levied when commodities are transferred across international boundaries (imports/exports) to safeguard the domestic economy.
Pre-GST vs. Post-GST (Subsumed Taxes)
| Pre-GST Tax Regime (Subsumed) | Post-GST Unified Regime |
|---|---|
| Central: Excise Duty, Service Tax, Additional Customs Duty (CVD). | GST (CGST, IGST) |
| State: VAT/Sales Tax, Entertainment Tax, Luxury Tax, Octroi, Entry Tax. | GST (SGST, IGST) |
Administrative Authority The Central Board of Indirect Taxes and Customs (CBIC) oversees the proceedings of the GST Council as a permanent invitee and handles the administration of customs and indirect tax policies.
Related: [[Taxation in India MOC]], [[Direct Taxes in India]]