Why in the news?
- India’s net direct tax collections witnessed a remarkable growth of 17.7% in the fiscal year 2023-24, reaching ₹19.58 lakh crore.
- This performance indicates a strong revenue stream for the government.
Direct Tax Collections Trends in this Fiscal
What Is Net of Tax?The term net of tax refers to the amount left after adjusting for the effects of taxes. Net of tax can be a consideration in any situation where taxation is involved. In the financial industry, ‘gross’ and ‘net’ are two key terms that refer to before and after paying certain expenses. It’s Significance:
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Types of Direct Taxes:
- Income Tax: Depending on an individual’s age and earnings, income tax must be paid. Various tax slabs are determined by the Government of India which determines the amount of Income Tax that must be paid.
- The taxpayer must file Income Tax Returns (ITR) on a yearly basis. Individuals may receive a refund or might have to pay a tax depending on their ITR. Huge penalties are levied in case individuals do not file ITR.
- Wealth Tax: The tax must be paid on a yearly basis and depends on the ownership of properties and the market value of the property. In case an individual owns a property, wealth tax must be paid and does not depend on whether the property generates an income or not.
- Corporate taxpayers, Hindu Undivided Families (HUFs), and individuals must pay wealth tax depending on their residential status.
- Payment of wealth tax is exempt for assets like gold deposit bonds, stock holdings, house property, commercial property that have been rented for more than 300 days, and if the house property is owned for business and professional use.
- Estate Tax: It is also called an Inheritance Tax and is paid based on the value of the estate or the money that an individual has left after his/her death.
- Corporate Tax: Domestic companies, apart from shareholders, will have to pay corporate tax. Foreign corporations who make an income in India will also have to pay corporate tax. Income earned via selling assets, technical service fees, dividends, royalties, or interest that is based in India are taxable. The below-mentioned taxes are also included under Corporate Tax:
- Securities Transaction Tax (STT): The tax must be paid for any income that is earned via taxable security transactions.
- Dividend Distribution Tax (DDT): In case any domestic companies declare, distribute, or are paid any amounts as dividends by shareholders, DDT is levied on them. However, DDT is not levied on foreign companies.
- Fringe Benefits Tax: Companies that provide fringe benefits for maids, drivers, etc., Fringe Benefits Tax is levied on them.
- Minimum Alternate Tax (MAT): For zero-tax companies that have accounts prepared according to the Companies Act, MAT is levied on them.
- Capital Gains Tax: It is a form of direct tax that is paid due to the income that is earned from the sale of assets or investments. Investments in farms, bonds, shares, businesses, art, and home come under capital assets.
- Based on its holding period, tax can be classified into long-term and short-term. Any assets, apart from securities, that are sold within 36 months from the time they were acquired come under short-term gains.
- Long-term assets are levied if any income is generated from the sale of properties that have been held for a duration of more than 36 months.
PYQ:[2014] The sales tax you pay while purchasing a toothpaste is a (a) Tax imposed by the Central Government (b) Tax imposed by the Central Government but collected by the State Government (c) Tax imposed by the State Government but collected by the Central Government (d) Tax imposed and collected by the State Government |
