Direct Taxation

Introduction

Involuntary charges levied on individuals or businesses and enforced by a government agency— whether local, regional, or national — to finance government operations are called taxes. In economics, taxes are levied on whoever bears the tax burden, be it the taxing entity, like a corporation, or the end-users of the company's goods. In India Taxes are categorized into two forms:

➲ Direct Taxes

From the name, we can understand that those taxes which are directly collected from individuals or body corporate are termed as direct taxes like Income tax.

➲ Indirect taxes

From the name, it is cleared that those taxes which are collected indirectly from individuals and body corporate are termed as indirect tax like GST, Customs Duty, Excise duty etc

Direct taxes

It is a tax explicitly imposed on a taxpayer who pays it to the government and is unable to pass it on to someone else. It is directly imposed on taxpayers on their direct income.

Types Of Direct Taxes:

➲ Income tax:

The tax is collected directly on the taxpayer’s income. The taxpayer has to pay the tax as per the income bracket (slab) in which they fall. These income slabs are decided by the government every year.

➲ Wealth tax:

Wealth tax is imposed on the value of the property an individual owns. However, the government has abolished this tax.

Advantages of Direct Tax:

➲ It curbs inflation: When there is monetary inflation, the government also raises the tax rate, which in effect decreases demand for goods and services, and inflation is expected to condense as a result of declining demand.

➲ Social and economic balance: The government has well-defined tax slabs and exemptions in place so that income differences can be balanced based on the earnings of each person and the overall economic situation.

Tax Slab

• Individuals below 60 Years of Age

Cess at 4 percent of the tax applicable in all cases. Profits surcharge above Rs. 50 lakhs at 10 percent and profits over Rs. 1 crore at 15 percent.

Under the old income tax system, a refund of Rs. 12,500 is available, while the same refund is available under the new income tax scheme if the annual taxable income does not exceed Rs. 5 lakhs.

The overall tax liability reduction will range from Rs. 25,000 for a person earning Rs. 7.5 lakhs a year to Rs. 75,000 for a person earning Rs 15 lakhs or more a year under the new tax slabs. The real savings, however, would be smaller if one were to consider the impact of ignoring exemptions under the new tax regime.

For Senior Citizens (age more than 60 years but less than 80 years FY 2019-20)

Cess at 4 percent of tax applicable in all cases. Profits surcharge above Rs. 50 lakhs at 10 percent and profits over Rs. 1 crore at 15 percent.

The Rs. 12,500 rebate applies to all wages under the old sales tax system. Whereas, under the current income tax law it is applicable only for income up to Rs. 5 lakhs.

Senior Citizens Tax Slab (age more than 80 years FY 2019-20)

Cess at 4 percent of tax applicable in all cases. Profits surcharge above Rs. 50 lakhs at 10 percent and profits over Rs. 1 crore at 15 percent.

New Income Tax Slab for Firms and Domestic Companies FY 2019-20

The table above highlights the most recent tax slabs for corporations and domestic firms. For both cases, the tax status varies from that of individuals and HUFs