A

Project report on

Taxation

Master’s in Business Administration (MBA)

ARYA INSTITUTE OF ENGINEERING TECHNOLOGY

2022-2024

SUBMITTED TO SUBMITTED BY
MS SANDHIKA KOTHARI MANOJ KUMAR PAREEK
(ASSISTANT PROFESSOR) MBA 1ST SEMESTER
(DEPARTMENT OF MBA) ROLL NO.

RAJASTHAN TECH NICAL UNIVERSITY, KOTA

DEPT. OF MBA

SP-40 RIICO INDUSTRIAL AREA, KUKAS, JAIPUR

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 DECLARATION

I undersigned, hereby declare that the project titled Taxation submitted in partial fulfillment for the
award of Degree of Master of Business Administration of Rajasthan Technical University, Kota is a
bona fide record of work done by me under the guidance of MS SANDHIKA KOTHARI (Arya
institute of engineering and technology, Kukas, Jaipur). This report has not previously formed the
basis for the award of any degree, diploma, or similar title of any University.

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Signature MANOJ KUMAR PAREEK
Date:

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 AKNOWLEDGEMENTS

Through this acknowledgement I express my sincere gratitude towards all those people who helped me
in this project, which has been a learning experience. This space wouldn’t be enough to extend my warm
gratitude towards my faculty guide SANDHIKA KOTHARI for efforts in coordinating with my work
and guiding in right direction. I escalate a heartfelt regard to our Institution Arya institute of
engineering and technology, kukas, Jaipur for giving me the essential hand in concluding this work. It
would be injustice to proceed without acknowledging those vital supports I received from my beloved
classmates and friends, without whom I would have been half done. I also use this space to offer my
sincere love to my parents and all others who had been there, helping me walk through this work.

MANOJ KUMAR PAREEK

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 DEPARTMENT OF MANAGEMENT

CERTIFICATE

This is to certify that the report titled “Taxation” being submitted by Manoj Kumar Pareek, in partial
fulfillment of the requirements for the award of the Degree of Master of Business Administration, RTU
Kota, is a bona fide record of the project work done by of Arya institute of Engineering and
Technology, Kukas, Jaipur.

Faculty Coordinator External Examiner

Name: MS Sandhika Kothari
(Assistant professor)

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Table of contents

S. NO. Name of Contents Page No.

1. Abstract 6
2. key words 6
3. Introduction of Topic 7
4. Review of Literature 15
5. Objectives of Review Paper 15
6. Research Methodology 15
7. Data Analysis & interpretation 15
8. Findings 38
9. Conclusion and Suggestions 37
10. Bibliography & Webliography 38

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Abstract

Taxation is the government’s primary source of revenue and the economic prosperity of every country is
primarily determined by the tax structure it has established. A tax system that makes doing business
simple and eliminates the possibility of tax evasion benefits a country’s economy. On other hand, on one
hand, there is a taxation framework that allows for tax evasion and on the other hand, there is a taxation
structure that does not allow for easy tax evasion. The cost of conducting business inhibits the country’s
economic progress. Indian tax has undergone numerous revisions, but it is still a long way from being an
ideal taxation system. Many issues, such as tax evasion, reliance on indirect taxes, black money and the
development of a parallel economy, indicate that the Indian tax system will require considerable
adjustments in the future to address all of these issues.

Key words

Indian tax structure, evolution of Indian Tax structure, Direct Tax, Indirect Tax, GST, Tax rates in India.

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 Introduction

History of Taxation

The first known taxation took place in Ancient Egypt around 3000-2800BC. A failure to pay in a timely
manner, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or
indirect taxes and may be paid in money or as its labor equivalent.

It was in 1850 that Sir JAMES WILLSON formally introduced the tax in India. He was the finance
minister of the pre – independent India. He introduced the tax during the first union budget session
under British rule. The Indian income tax act of 1860 marks the watershed moment for taxation in India.
It is through this act that centrally organized taxation began in India. The act was introduced to recover
the losses the government suffered from the 1857 military mutiny.

Under this act, the taxation was divided into four sub group. The incomes form land, profession or trade,
securities and salaries/pensions were taxed under this new act.

The law was revised in 1886 to improvise on some categories included net salaries and profits form
business.

The next revision came in 1918 and 1922 the act of 1918 repealed the 1886 act and formed many new
important changes. The act of 1922 is extremely important since it has since then that India started to
have an operational Income Tax Department. This cat distinguished various departments of the Income
tax authorities. Over the years the act became more and more complicated over the years due to the
amendments made by various Governments over the courses of decades. The act of 1922 remained in
effect in India till 1961. The act was brought by the British and later in 1956 Government of India
referred to a law commission to make it simpler.

The Indian Income Tax act of 1961 came into effect after consultation with the Ministry of Law. It was
brought into force in April 1962. All citizen of India are bound by this act. Since 1962 many
amendments have been made by the act annually by the Union Budget. The bills become acts after it is
passed by both upper and lower houses of parliament and get presidential assent to it. Currently, five
categories of income are considered for tax. They are as follows; Salary, property, capital gains, profits
from business and other sources of income.

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Definitions

Taxes are levied by governments on their citizen to generate income for undertaking projects to boost
the economy of the country and to raise economy of the country and to raise the standard of living of its
citizens.

The authority of the government to levy taxes in India is derived from the constitution of India, which
allocates the power to levy taxes to central and state government. All taxes levied within India need to
be backed by an accompanying law passed by the parliament or the state legislature.

Tax is a compulsory contribution to state revenue, levied by the government on taxpayer’s income and
business profits or value added to the cost of some goods, services, and transaction.

Based on the Low No. 28 of 2007 on the General provision and administration of taxation Article 1
point 1, tax is defined as compulsory contribution to the state paid by individuals or legal entities that
are enforceable under the Act, without getting direct benefits and used by state for maximum benefit by
prosperity of the people.

The incidence of an individual depends upon his residential status, which is defined on the basis of his
physical presence in India as per the Income Tax Act.

According to Adam Smith, “Tax is a compulsory payment levied by the government on individuals or
companies to meet the expenditure which is required for public welfare.

Taxation is the means by which a government or the taxing authority imposes or levies a tax on its
citizens and business entities. From income tax to goods and services tax (GST), taxation applies to all
levels.

In other words Taxation, imposition of compulsory levies on individuals or entities by governments.

Taxes are levied in almost every country of the world, primarily to raise revenue for government
expenditures, although they serve other purposes as well.

According to Hugh Dalton, “A tax is a compulsory contribution imposed by a public authority,

irrespective of the exact amount of service rendered to the taxpayer in return, and not imposed as penalty
for any legal offence.”

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Types of Taxes

1. Direct Tax
2. Indirect Tax

1. Direct Tax

A direct tax is a tax that a person or organization pays directly to the entity that imposed it.
Examples include income tax, real property tax, personal property tax, and taxes on assets, all of
which are paid by an individual taxpayer directly to the government.

Types of Direct

 Income tax

It is based on one’s income. A certain percentage is taken from a worker’s salary, depending on how
much he or she earns. The good thing is that the government is also keen on listing credits and
deductions that help lower one’s tax liabilities.

 Transfer taxes

The most common form of transfer taxes is the estate tax. Such a tax is levied on the taxable portion of
the property of a deceased individual, including trusts and financial accounts. A gift tax is also another
form wherein a certain amount is collected from people who are transferring properties to another
individual.

 Entitlement tax

This type of direct tax is the reason why people enjoy social programs like Medicare, Medicaid,
and Social Security. The entitlement tax is collected through payroll deductions and is collectively
grouped as the Federal Insurance Contributions Act.

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  Property tax

Property tax is charged on properties such as land and buildings and is used for maintaining public
services such as the police and fire departments, schools and libraries, as well as roads.

 Capital gains tax

This tax is charged when an individual sells assets such as stocks, real estate, or a business. The tax is
computed by determining the difference between the acquisition amount and the selling amount.

1. Indirect Tax

Indirect tax is a tax that can be passed on to another individual or entity. Indirect tax is generally
imposed on suppliers or manufacturers who pass it on to the final consumer.

There are different types of indirect tax in India. However, after the implementation of GST, all these
indirect taxes were bundled into one singular tax for the citizens of India. We will have a look at the
different types of indirect tax in India:

1. Service tax

 This tax is levied by an entity in return for the service provided by them. The service tax is
collected by the Government of India and deposited with them.

2. Excise duty

 When any product or good is manufactured by a company in India, then the tax levied on those
goods is called the Excise Duty. The manufacturing company pays the tax on the goods and in
turn recovers the amount from their customers.

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 3.) Value added Tax  

Also known as VAT, this type of tax is levied on any product sold directly to customer and is
movable. VAT consists of Central Sales Tax which is paid to the Government of India State
Central Sales Tax which is paid to the respective State Government.

3. Custom Duty 

This a tax levied on the goods imported to India. Sometimes, Customer Duty is also levied on
products which are exported out of India.

4. Stamp Duty

This is a tax levied on the transfer of any immovable property in a state of India. The state
government in whose state the property is located charges this type of tax. Stamp tax is also
applicable on all legal documents too.

5. Entertainment Tax

This tax is charged by the state government and is applicable on any products or transactions
related to entertainment. Purchasing of any video games, movie shows, sports activities, arcades,
amusement parks, etc. are some of the products on which Entertainment Tax is charged.

6. Securities Transaction Tax

This tax is levied during the trading of securities through Indian Stock Exchange.

Taxation system in India

India currently has a well-developed three-tier federal tax framework with well- defined power between
the Central and State Governments, as well as municipal entities. The Central Government charges
income taxes (save for agricultural income, which is levied by the State Governments), customs duties,
the Central Goods and Services Tax (CGST), and the Integrated Goods and Services Tax (IGST)
(IGST). State governments levy taxes such as the State Goods and Services Tax (SGST), stamp duty,

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state excise, land revenue, and profession tax. Local governments have the authority to charge taxes on
properties, octroi, and facilities such as water supply and drainage. According to the Indian tax system,
the government collects taxes from its inhabitants in order to create revenue for public-works projects
and to improve the country's economic footprint.

Section 2(24) of the Income Tax Act of 1931 defines "Income" as "the sum of money which any
individual or business earns during a specific period of time from the many accessible sources of
Income." It signifies that the money received by an individual as pay and compensation from the
employer who has hired him to undertake a specific task is his principal source of income. Similarly, in
the case of a firm, the revenue earned by fulfilling key business operations is regarded as the company's
income. In layman's terms, income is the money received by an individual over a specific period of time.

Difference between Direct Tax and Indirect Tax

1) The impact of direct taxation is felt immediately by the taxpayer. In the beginning, indirect taxes were
levied on traders or producers, but they were eventually levied on buyers of goods or services.

2) In the case of direct taxes, shifting the burden is difficult because the tax payer must suffer the tax.
The indirect tax might be passed on to other people.

3) In the case of direct taxes, the potential for evasion is substantial due to account falsification and
other means.

4) Income suppression In the case of indirect taxes, the opportunity for tax fraud is limited because the
tax is included in the purchase of a product or service.

5) Inflation can be reduced through direct taxation, but it can also be increased through indirect taxation.

6) Direct taxes have a negative impact on taxpayers' ability to save and invest. In the case of indirect
taxes, savings and investment may grow when non-essential items and services are reduced.

7) Direct taxes are progressive, reducing inequalities, but indirect taxes are regressive, increasing
inequalities.

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8) In the case of indirect taxes, by heavily taxing hazardous items such as cigarettes, liquors, and so on,
the government can channel people's purchasing power toward useful items, so creating a beneficial
consumption pattern.

9) Direct taxes are typically complex, with numerous exemptions, procedures, and provisions that may
necessitate the assistance of professional accountants and auditors, resulting in higher administrative
costs, whereas indirect taxes have lower administrative costs due to convenient and consistent
collections.

10) Indirect taxes have a broader reach because they are levied on all members of society through the
sale of goods and services, whereas direct taxes are levied solely on those who fall into specific tax
brackets

Major Central Taxes

 Income Tax
 Central Goods & Services Tax (CGST)
 Customs Duty
 Integrated Goods & Services Tax (IGST)

Major State Taxes

 State Goods & Services Tax (SGST)

 Stamp Duty & Registration

Challenges in Taxation

1. Lake of agricultural income tax

In spite of agriculture being the foremost sector of the Indian economy there is no tax on agricultural
income. Agriculture tax falls under the purview off the state and not the central government which has
made it nearly impossible to table any agricultural tax system. Another factor to contend with is
taxpayers who falsely claim exemption under the head of agricultural income. Farmers constitute a
valuable vote bank for political parties so no one wants to upset the status quo.

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 2. A parallel black money economy

Tax evasion is one of the major challenges for the taxation system in India. The amount of money
evaded generates an illegal hoard which is called black money. Assesses submit false claims lesser
profits or turnover, expenses receipts. Sales figures and books are manipulated. Tax refunds are claimed
by making false representations before tax authorities. But it is equally true that the prevention and
control of black money is priority for transitioning towards a fair and transparent economy.

3. Tax burden skewed more towards corporate sector

It is the corporate sector that is bearing the brunt of taxation both the direct and Indirect Taxes. When
this happens, corporations then tend to shift this tax burden onto shareholders and customers who
actually can constitute a very small group. This does not bode well for a fair economy. Also with
corporations, there are chances of large scale tax evasions happening which could result in loss of tax
revenue.

4. Excessive dependence on indirect taxes

Indirect taxes collection has seen a spike. However this implies that the government kitty has taken a hit
in terms of revenue flow to the government coffers

5. Low side of people outside agriculture registered for IT

A finance ministry report pegged the total number of taxpayers for AY 2020-21 to be 82283407.
Compare as on March 1, 2021 was 136.30corer and the yawning gap comes to the fore. The challenge
here is to bring in more non-filers into the tax ambit by devising region specific or industry and sector
specific tax strategies.

Research

Research is a process of systematic inquiry that entails collection of data, documentation of critical
information and analysis and interpretation of that data/information, in accordance with suitable
methodologies set by specific professional fields and academic.

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Research methodology

Research methodology is the specific procedures or techniques used to identify select, process and
analyze information about a topic. In a research paper the methodology selection allows the reader to
critically evaluate a study’s over all validity and reliability, the methodology selection answers to two
main questions: How data collected was the data collected or generated? How was it analyzed?

TYPE OF RESEARCH

The type of method that will be used in this paper are doctrinal in nature and the data are collected from
the secondary resources like journals, articles, media reports, Books, Case laws and different websites.
The secondary resources will be used as a reference to analyze and understand the criticism behind the
study of this research paper.

DATA COLLECTION

In order to achieve objective of the study the methodology is based mainly on secondary data collection.
The data has been collected from different sources like articles, research paper, government websites,
etc.

Data Interpretation and analysis

Review of Literature

 An analysis of Indian Tax Structure, BY Anjali Tyagi, in this study author focuses on Indian Tax
Structure and various sources of taxation and techniques of tax collection.

Objectives of this review paper

 To analysis the sources of tax.

 To study the trend of taxation in India.

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Sources of Tax revenue in India

Following are the major Tax revenue sources

1. Income tax
2. Corporate tax
3. Goods and service tax (GST)
4. Customs duties
5. Union excise duties
6. Wealth tax & Gift tax
1) INCOME TAX

Meaning and definition

Income tax, levy imposed on individuals (or family units) and corporations. Individual income tax is
computed on the basis of income received. It is usually classified as a direct tax because the burden is
presumably on the individuals who pay it.

Role of Income Tax in India

In the Indian economy, the direct tax or income tax makes a smaller contribution than the indirect tax.
The reason why income tax or direct tax contributions are lower in the Indian economy is that income
tax is imposed based on the income produced by the people, and there is also a defined limit of income.
If the income earned exceeds the established limit, only income tax is levied on that income; however, in
India, the majority of the population earns less than the

Stated limit, hence their income is exempt from income tax. Exclusively a small part of India's overall
population earns income that exceeds the stipulated limit, and income tax is levied only on this income.
In India, there is a progressive income tax system, which means that a higher rate of tax is levied on the
wealthy while a lower rate of tax is levied on the poor. In the small portion of the population whose
income exceeds the set limit, a very small number of people fall into the richer section group on whom a
high rate of income tax is levied, which is why the direct tax or income tax contributes very little to the
Indian economy because a very small amount of revenue is generated from the direct tax or income tax.

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On the other side, the reason why indirect taxes contribute more to the Indian economy is that indirect
taxes are levied on goods and services rather than on income. People's earnings In the case of indirect
taxation, the tax are incorporated into the price of products and services, and the prices are fixed. The
fact that prices for goods and services are the same for everyone means that there is no distinction
between rich and poor people. Thus, because both the rich and poor pay the same amount for products
and services, the same amount of tax is collected from both groups, which ultimately boosts revenue
generated through indirect taxes, which are India's main sources of tax revenue and play a key part in the
Indian economy. The percentage of revenue earned by income tax can be used to determine how
important income tax is in the Indian economy. Over the last six years, income tax revenue has
accounted for 40.24 percent of all revenue generated by direct taxation in India

Sources of Income Tax

Following are the sources of Income Tax in India

Features of income Tax

 Income tax is one of the most common taxes in the country. It is of 4 types’ direct tax, indirect
tax, business tax, and property and sales tax.
 It is compulsory for all liable citizens to pay tax and refusing to do so is punishable offence.
 Tax is payable periodically and regularly as determined by the tax authority.
 It is levied in order to meet the government’s public expenditure.
 Tax does not have any direct quid pro quo between the public authority and taxpayers

Income from Salary

Any income that you receive in terms of the service you provide on a contract of employment is
applicable for taxation under this head. This includes salary, advance salary, perquisites, gratuity,
commission, annual bonus and pension.

This tax head also includes some exemptions

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House Rent Allowance (HRA)

As a salaried individual, if you can claim house rent allowance for partial or complete tax exemption.

Conveyance Allowance

You can get a monthly tax exemption of up to RS 800.

Income from house property

An individual’s income from his or her property or land is taxable under the head of income form house
property. To put it simply, this head includes the policy for calculating tax on rental income that you
receive from your properties.

In case you own more than one self-occupied and the rest are considered to be rented out. The taxation
occurs on income received from both commercial and residential property.

Income from profits and gains from business or profession

The profits that you earn from any kind of business or profession are taxable under this head. You can
subtract your expenses from the total income in order to determine the amount on which tax is
chargeable.

Here are the types of income that are chargeable under this head

 Profits generated from the sale of a certain license

 Gains earned by an individual during and assessment year
 The profits that an organization makes on its income.
 Can received on the export of a government scheme
 The benefits that a business receives

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  Gains, bonuses or salary that an individual receive due to a partnership with a firm.

Income from Capital Gains

When you earn profits by transferring or selling an asset that was held as an investment that income is
taxable under the head of income from capital gains. A large number of asset, like hold, bonds, mutual
funds, real estate, stocks, etc. fall under capital assets. When you sell your capital assets after holding
them for a period of 36 months or more, they will fall under long- under long term capital gain and will
have a tax rate of 20% alternatively, if you sell your capital assets within a period of 36 months the tax
deduction will be under short term capital gain at the rate of 15%. In the case of securities this is
applicable if you sell your holdings within 12 months from the purchase date.

Income from other sources

Among the five heads of income tax, this one includes any other income that does not have any
me3ntion in the above 4 heads. They fall under section 56 sub section (2) of the income tax act and
includes following incomes

 Income from lottery

 Bank deposits
 Gambling
 Card games
 Sport rewards

Collection of Income Tax India

According to press note of ministry of Finance

 Gross direct tax collections for the financial year (FY) 2022-23 register a growth of 30%.
 Net direct tax collections for the FY 2022-23 have grown at 23%

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  Advance tax collection for the FY 2022-23 stands at RS 295308 corers as on 17/09/2022 which
shows a growth of 17%.
 Refunds aggregating to RS 135556 cores have been issued in the current fiscal, higher by 83%
over the preceding year.
 The figures of Direct Tax collections for the FY 2022-23, as on 17.09.2022 show that net
collections are at RS 7 00669 core, compared to RS5,68,147 core in the corresponding period of
the preceding Financial Year i.e. FY 2021-22, representing an increase of 23%.
 The Net Direct Tax collection of RS 700669 core (net of refund) includes Corporation Tax (CIT)
at RS 368484 cores and Personal Income Tax (PIT) including Securities Transaction Tax (STT)
at RS 330490 core.
 The Gross collection of Direct Taxes (before adjusting for refunds) for the FY 2022-23 stands at
RS 8, 36,225 core compared to RS 6,42,287 core in the corresponding period of the preceding
Financial Year i.e. FY 2021-22, registering a growth of 30% over collections of FY 2021-22.

New Income Tax Slabs for FY23-24

In India, income tax is calculated using income tax slabs and rates for the applicable financial year (FY)
and assessment year (AY). The income tax slab for AY 2023-24 was published as part of the Union
Budget 2022-23.

Income Tax Slab

Individual taxpayers must pay income tax based on the slab system into which they fall. Individuals may
fall into a different tax bracket depending on their Income. As a result, persons with higher incomes will
have to pay more taxes.

The slab system was implemented to keep the country's tax system equitable. The slabs change with
each budget announcement.

Income Tax Slab for FY 2023-24 (AY 2024-25)

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The following tables show the Revised Income Tax Slabs and not the old tax regime. The table for the
new tax regime slabs

Tax Slab Rates

Up to RS 3,00,000 NIL
RS 300,000 to RS 6,00,000 5% on income which exceeds RS 3,00,000
RS 6, 00,000 to RS 900,000 RS 15,000 + 10% on income more than RS 6,00,000
RS 9, 00,000 to RS 12,00,000 RS 45,000 + 15% on income more than RS 9,00,000
RS 12, 00,000 to RS 1500,000 RS 90,000 + 20% on income more than RS 12,00,000
Above RS 15,00,000 RS 150,000 + 30% on income more than RS 15,00,000

Income Tax Slab for People between 60 to 80 Years

Tax Slabs Rates

RS 3 lakhs NIL
RS 3 lakhs - RS 5 lakhs 5.00%
RS 5 lakhs - RS 10 lakhs 20.00%
RS 10 lakhs and more 30.00%

Tax slab for senior citizen

Tax Slabs Rates

RS 0 - RS 5 lakhs NIL
RS 5 lakhs - RS 10 lakhs 20.00%
Above RS 10 lakhs 30.00%

Tax Slabs for Domestic Companies

Particulars Existing or Old New

regime Tax Regime Tax

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 Rates Rates
Company opts for section 115BAB (not covered in section 115BA - 15%
and 115BAA) & is registered on/after October 1, 2019 and has
started manufacturing on/before 31st March 2023
Company opts for Section 115BAA , where the total income of a - 22%
company has been calculated without claiming specified deductions,
exemptions, incentives, and additional depreciation
Company opts for section 115BA registered on/after March 1, 2016, - 25%
and is in the manufacture of any article or thing and does not claim
a deduction as specified in the section
Turnover/gross receipt of the company is less than RS 400 cores in 25% 25%
the previous year
Other Domestic Company 30% 30%

 Surcharge applicable for companies-

 7% of Income tax where total income is more than RS 1 core

 12% of Income tax where total income is more than RS10 cores
 10% of income tax where domestic company opted section 115BAA and 115BAB

 Additional Health & Education Cess Rate - 4%

Income Tax Rate for Partnership Firm or LLP (limited liability partnership) as Per Old/New
Regime

Partnership firm or an LLP is taxable at 30%

Note -

 A Surcharge of 12% is levied on incomes above RS 1 core.

 Health and Education Cess Rate - 4 %

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Income Tax Slab Rate for New Tax Regime

The HUF and Individual tax slab applicable in the New Tax regime-

Slab New Tax Regime New Tax Regime

(Before Budget 2023 - until 31 (After Budget 2023 - From 01
March 2023) April 2023)
RS 0 to RS 2,50,000 NIL NIL
RS 2,50,000 to RS 5% NIL
3,00,000
RS 3,00,000 to RS 5% 5%
5,00,000
RS 5,00,000 to RS 10% 5%
6,00,000
RS 6,00,000 to RS 10% 10%
7,50,000
RS 7,50,000 to RS 15% 10%
9,00,000
RS 9,00,000 to RS 15% 15%
10,00,000
RS 10,00,000 to RS 20% 15%
12,00,000
RS 12,00,000 to RS 20% 20%
12,50,000
RS 12,50,000 to RS 25% 20%
15,00,000
More than RS 15,00,000 30% 30%

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Tax Rates for Individuals and HUF below the age of 60 years and NRIs-

Income Tax Slab Tax Rates

Up - RS 2,50,000 Nil
RS 2,50,001 - Rs5,00,000 5%
RS 5,00,001 - RS 10,00,000 20%
Above RS 10,00,000 30%

Surcharge

 Surcharge applicable as per tax rates below in all categories that are afore-mentioned -

 10% of Income tax if total income is more than RS50 lakh

 15% of Income tax if total income is more than RS1 core

 25% of Income tax if total income is more than RS2 core

 37% of Income tax if total income is more than RS5 core

Note - In the Budget for the year 2023, the highest surcharge rate of 37% has been decreased to 25%
under the New Tax Regime (Meant to be applicable from April 1st, 2023)

The last 10 years collection of Income Tax are given as follows

Actual figures based on internal reporting / MIS of the income Tax department or figures reported by
controller general of accounts or data published by other government agencies.

(RS in corer)
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Financial Year Income tax collection
2008-09 120034
2009-10 132833
2010-11 146258
2011-12 170181
2012-13 201840
2013-14 242888
2014-15 265772
2015-16 287632
2016-17 349503
2017-18 419998

Income tax collection

450000
400000
350000
300000
250000 Income tax collection
200000
150000
100000
50000
0
2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017-
09 10 11 12 13 14 15 16 17 18

2) Corporate Tax

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A corporate tax is tax on the profits of a corporation. The taxes are paid on a company’s taxable income,
which includes revenue minus cost of goods sold, general and administrative expenses, selling and
marketing research and development, depreciation and other operating costs.

Corporate tax rates vary widely by country widely by country with some countries considered to be tax
havens due to their low rates. Corporate taxes can be lowered by various deductions,
Government subsidies, and tax loopholes, and so the effective corporate tax rate, the rate a corporation
actually pays, is usually lower than the statutory rate; the stated rate before any deductions.

Corporate Tax rate in India

In the long term the India corporate tax is projected to trend around 34.94% in 2023 according to our
econometric models. In India, the corporate income tax rate refers to the highest effective rate for
corporate income for domestic companied.

Corporate Tax Deductions

Corporations are permitted to reduce taxable income by certain necessary and ordinary business

expenditures. All current expenses required for the operation of the business are fully tax-deductible.
Investments and real estate purchased with the intent of generating income for the business are also
deductible.

A corporation can deduct employee salaries, health benefits, tuition reimbursement, and bonuses. In
addition, a corporation can reduce its taxable income by deducting insurance premiums, travel
expenses, bad debts, interest payments, sales taxes, fuel taxes, and excise taxes. Tax preparation fees,
legal services, bookkeeping, and advertising costs can also be used to reduce business income.

Special Considerations

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A central issue relating to corporate taxation is the concept of double taxation. Certain corporations are
taxed on the taxable income of the company. If this net income is distributed to  shareholders, these
individuals are forced to pay individual income taxes on the dividends received. Instead, a business
may register as an S corporation and have all income pass-through to the business owners. An S
corporation does not pay corporate tax as all taxes are paid through individual tax returns.

Advantages of a Corporate Tax

 Paying corporate taxes can be more beneficial for business owners than paying additional
individual income tax. Corporate tax returns deduct medical insurance for families as well as
fringe benefits, including retirement plans and tax-deferred trusts. It is easier for a corporation
to deduct losses, too.

 A corporation may deduct the entire amount of losses while sole proprietors must provide
evidence regarding the intent to earn a profit before the losses can be deducted. Finally, profit
earned by a corporation may be left within the corporation, allowing for tax planning and
potential future tax advantages.

3) Goods and Service Tax

The goods and services tax (GST) is an indirect federal sales tax that is applied to the cost of certain
goods and services. The business adds the GST to the price of the product, and a customer who buys
the product pays the sales price inclusive of the GST. The GST portion is collected by the business or
seller and forwarded to the government. It is also referred to as Value-Added Tax (VAT) in some
countries.

Most countries with a GST have a single unified GST system, which means that a single tax rate is
applied throughout the country. A country with a unified GST platform merges central taxes (e.g., sales
tax, excise duty tax, and service tax) with state-level taxes (e.g., entertainment tax, entry tax, transfer
tax, sin tax, and luxury tax) and collects them as one single tax. These countries tax virtually everything
at a single rate.

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The goods and services tax (GST) is a value added tax levied on most goods and services sold for
domestic consumption. The GST is paid by consumers, but it is remitted to the government by the
business by the business selling the goods and services.

Key lines of GST

 The goods and services tax (GST) is a tax on goods and services sold domestically for
consumption.

 The tax is included in the final price and paid by consumers at point of sale and passed to the
government by the seller.

 The GST is usually taxed as a single rate across a nation.

 Government prefers GST as it simplifies the taxation system and reduces tax avoidance.

 Critics of GST say it burdens lower income earners more than higher income earners.

GST structure in India

Indian government starts GST system on 1 July 2017. The government applies dual goods and service
structure in India.

GST has three types

1. Central GST

2. State GST

3. Integrated GST

I. Central Goods and Serviced Tax

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The central government levies GST on intra-state goods and services transactions. The central
government collects the revenue generated through central Goods and Services Tax (GST). It along s
levied with SGST or UGST, and revenues are shared between the state and the center.

For example, if you are a Bengaluru based dealer and are selling to another dealer in Bengaluru since
it’s an intra- state sale, both, both CGST and SGST will be applicable on this transaction. If your
transaction of goods is worth RS 30000 and it attracts 18 % GST then 9% which is RS 2700 of the tax
amount is collected as SGST by the state government and a matching amount is collected as CGST be
the center.

II. State Goods and Services

SGST is the tax that the state government levies on intra-state goods and service transactions. SGST
subsumes earlier taxes such as VAT, entertainment tax. Luxury tax, tax on lottery and purchase tax.
UGST or union territory goods and services tax replaces SGST union territories like Andaman Nicobar
Islands or Chandigarh.

III. Integrated Goods and Service Tax

Integrated Goods and Services Tax is the Tax levied on inter-state goods and service transactions. It
applies to imports and exports as well. Under IGST, the taxes charged are shared by both the center and
state. The SGST part of the tax goes to the state wherein the goods and services are consumed.

Tax slab for GST

The primary GST slabs for any regular taxpayers are presently pegged at 0%, 5%, 18%, and 28%

Products Taxation rates

 Milk 0%

 Egg

 Curd

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 Lassie

 Unpacked food grains and pannier

 Sugar 5%

 Package Pannier

 Coffee Beans

 Domestic LPG

 Skimmed Milk

 Cashew Nuts

 Butter 12%

 Ghee

 Processed Food

 Almonds

 Mobile

 Hair Oil 18%

 Capital Goods

 Toothpaste

 Pasta

 Computers

 Small cars 28%

 Consumer Durables (AC & Fridge)

 Luxury and Sin Items

4.) Custom Tax

Customs duties are charges levied on goods when they cross international borders. Customs duties are
charged by special authorities and bodies created by local governments and are meant to protect local

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industries, economies, and businesses. Different products, as well as different countries of origin, may
have different customs duties associated with them.

The important Customs related functions include the following:

(a) Collection of Customs duties on imports and exports as per the Customs Act, 1962 and the Customs
Tariff Act, 1975

(b) Enforcement of various provisions of the Customs Act, 1962 governing imports and exports of
cargo, baggage, postal articles and arrival and departure of vessels, aircrafts etc.

(c) Discharge of agency functions and enforcing prohibitions and restrictions on imports and exports
under various legal enactments

(d) Prevention of smuggling including interdiction of narcotics drug trafficking

(e) International passenger clearance.

Type of custom duty in India

Type of custom Rate When applicable

duty
Basic Customs BCD is decided Basic Customs Duty is assessed on all goods
Duty (BCD) according to the HS imported into India. The actual fee paid will depend
code of the product and on where goods are coming from, what they are,
its origin. It can be from and what they’re made of. Some goods such as
0% to 100%. lifesaving medicines may be exempt - and therefore
receive a 0% BCD rate.
Countervailing 0% to 12% depending Countervailing duty is applied on products which
Duty (CVD) on the product received benefits like tax breaks or subsidies in the
country where they were manufactured. The aim of

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 this duty is to stop these products having an unfair
advantage over locally produced goods.
Special 4% where applied Special Additional Duty of Customs is applied on
Additional Duty some imported goods, where the locally produced
(SAD) equivalents would be subject to sales tax. This is to
make sure that domestic manufacturing is not at a
disadvantage. SAD is calculated on the total of the
assessable value of the goods, plus other taxes that
must be paid such as BCD and CVD.
Social Welfare 10% where applied The Social Welfare Surcharge was introduced in
Surcharge (SWS) 2018 to support government social welfare projects.
This fee replaces the Education Cesses which were
previously used. Goods which were previously
exempt from Education Cesses are likely to be
exempt from SWS, too.
Safeguard Duty By notification Safeguard Duty can be imposed by the Indian
customs authorities if it is needed to protect local
industries from an increased volume of imported
goods. If imports are damaging local producers,
they may become subject to Safeguard Duty.
Anti-dumping By notification Dumping is an unfair international trade practice
Duty which involves selling goods in a foreign market
for below production cost, or below their market
value. This would severely damage local industry,
and is therefore counteracted by Anti-dumping
Duties where required.
Compensation Applied according to Compensation Cess was created to compensate
cess product type, for items manufacturing heavy states which would lose
such as tobacco revenue when the new IGST was brought in
products, and pollution nationally in 2017. This tax is intended to be used
causing products like for 5 years to ease the transition into IGST for these

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 coal and cars. states.
Integrated Goods 5%, 12%, 18%, 28% The Integrated Goods & Services Tax (IGST) came
& Services Tax into being in 2017. It brought together various
(IGST) other existing taxes under one umbrella. IGST is
applied on imported goods under one of 7 different
rates, and is used to create a level playing field
between imported goods and local goods which are
also subject to various taxes.
Customs handling 1% On top of any other taxes payable, there is a 1%
fee customs handling fee to pay.

Custom duty collection for last years (2015 – 2018)

(RS In corer)

Financial year Custom duty

2015-16 219338

2016-17 225370

2017-18 136929

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 Custom duty
250000

200000

150000 Custom duty

100000

50000

0
2015-16 2016-17 2017-18

4. Excise Duty

An excise or excise tax (sometimes called an excise duty) is a type of tax charged on goods produced
within the country (as opposed to customs duties, charged on goods from outside the country). It is a tax
on the production or sale of a good. This tax is now known as the Central Value Added Tax (CENVAT).
It is mandatory to pay duty on all goods manufactured, unless exempted.

Types of excise duty

There are three different types of central excise duties which exist in India which are as follows:

Basic

Excise Duty, imposed under section 3 of the 'Central Excises and Salt Act' of 1944 on all excisable
goods other than salt produced or manufactured in India, at the rates set forth in the schedule to the
Central Excise tariff Act, 1985, falls under the category of basic excise duty in India.

Additional
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Section 3 of the 'Additional Duties of Excise Act' of 1957 permits the charge and collection of excise
duty in respect of the goods as listed in the schedule of this act. This tax is shared between the central
and state governments and charged instead of sales tax.

Special

According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods
that come under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of
1944. Therefore, each year the Finance Act spells out that whether the Special Excise Duty shall or shall
not be charged, and eventually collected during the relevant financial year.

1. Wealth Tax and Gift Tax

A wealth tax is a tax based on the market value of assets owned by a taxpayer. Some developed
countries choose to tax wealth, although the United States has historically relied on taxing
annual income to raise revenue.

A wealth tax, also called capital tax or equity tax, is imposed on the wealth possessed by individuals.
The tax usually applies to a person’s net worth, which are assets minus liabilities. These assets include
(but are not limited to) cash, bank deposits, shares, fixed assets, personal cars, real property, pension
plans, money funds, owner-occupied housing, and trusts.

Gift tax is an act introduced by the Parliament of India in 1958. It was introduced to impose tax on
giving and receiving gifts under certain circumstances which is specified under the act. These gifts can
be in any form including cash, jewelry, property, shares, vehicle, etc.

Gift Tax Exemption

Though gift tax is applicable on gifts whose value exceeds Rs.50, 000, the gift is exempted from tax if it
was given by a relative. The income tax rule specifies who can be considered as a relative and the list is
mentioned below.

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  Parent
 Spouse
 Siblings
 Spouse's siblings
 Lineal descendants
 Lineal descendants of the spouse

There are several other situations where the gifts can be exempted from tax. Listed below are other
situations in which the gift will be exempted from tax.

 Gifts received during weddings are usually exempted from tax.

 Gifts received as part of inheritance is exempted from tax.
 Cash or rewards received by local authorities or educational institutions on the basis of merit are
exempted from tax.

NOTE:  if the aggregate value of gifts received during the year exceeds RS 50,000, then total
value of all such gifts received during the year will be charged to tax (i.e. the total amount of gift and
not the amount in excess of RS 50,000).

Recent trend of Taxation in India

According to press release of Government of India (Ministry of finance).

The provisional figures of Direct Tax collections up to 10th January, 2023 continue to register steady
growth. Direct Tax collections up to 10th January, 2023 show that gross collections are at Rs. 14.71
lakh crore which is 24.58% higher than the gross collections for the corresponding period of last
year. Direct Tax collection, net of refunds, stands at Rs. 12.31 lakh crore which is 19.55 % higher
than the net collections for the corresponding period of last year. This collection is 86.68% of the
total Budget Estimates of Direct Taxes for F.Y. 2022-23.

So far as the growth rate for Corporate Income Tax (CIT) and Personal Income Tax (PIT) in terms of
gross revenue collections is concerned, the growth rate for CIT is 19.72% while that for PIT

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 (including STT) is 30.46%. After adjustment of refunds, the net growth in CIT collections is 18.33%
and that in PIT collections is 21.64% (PIT only)/ 20.97% (PIT including STT).

Refunds amounting to Rs.2.40 lakh crore have been issued during 1st April, 2022 to 10th January
2023, which are 58.74% higher than refunds issued during the same period in the preceding year.

Impact of Taxation on Economy

Tax is one of the most important sources of revenue to the Government and at the same time one of the
deciding parameters for economic growth. Whereas direct tax impacts directly the disposable income,
the indirect tax impacts the prices of goods and services in the market.

The impact of direct tax on economic growth

The direct tax is one of the important sources of government revenue. Further it also impacts directly the
disposable income of individuals. If direct tax rate is increased by the Government, people start saving
for investment purposes. Due to this behavior of individual’s income generation process of economy is
hampered. Particularly this is true for luxury commodities. This decreases the production of luxury
commodities in the economy and as a result also adversely affects the GDP and standards of living.
However on the positive sides, if proper deductions are allowed based on investments, it leads to capital
formation in the country. Thus, broadly following are the positive sides of direct taxes on the economic
growth.

 Better capital formation

 Inducement of saving and investment
 Surety of government’s revenue growth
 Increase in planned expenditure of government
 Decrease in inflation rate due to lesser availability of disposal income to persons
 Timely availability of revenue to the government.

Impact of Indirect Tax on Economy

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Since the burden of Indirect taxes directly fall on the consumers, it directly impacts the cost of goods
and services. Thus, indirect tax increases the efficiency of the producers, since to maintain their demand
they will have to put their full efforts towards cost cutting measures. Further, this effort of producers
also brings proper utilization of resources in the economy. The consumers are at freedom to select
products at their choice, thus healthy competition also grows in the economy. Thus, broadly following
are the positive sides of indirect taxes on the economic growth:

 Better utilization of resources

 Increase in efficiency of producers
 Growth of healthy competition in the market
 More freedom of choice to the consumers
 Increase in demand for luxury goods
 Increase in standard of living of people

Findings

 High tax rates can discourage economic growth by reducing incentives for investment and
entrepreneurship. Therefore, policy makers should be careful when implementing tax policies to
ensure that they do not create disincentives for economic activity.
 Taxation can have significant distributional effects on income. Specifically, reducing top
marginal tax rates can contribute to income inequality.
 Tax revenues are generally proportional to the size of the economy grows, policymakers can
expect to collect more revenue from taxation.

Conclusion and Suggestions

While the tax department is technologically advanced, improvements to the administrative and
procedural components may be required. The information and data on which the tax authorities have
relied must be made public. The statute should ban departmental authorities and assessing officers from
using information obtained from unsubstantiated, private sources in international tax transactions.
Because India is a high-tax nation, foreign corporate companies must proceed with prudence before
establishing a presence there. Choosing an appropriate mode of sale, determining the type of entity and
nature of operations, and appointing distributors.

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The government could also strive to provide certain tax benefits to taxpayers in order to stimulate them
to earn more by committing more hours to work and working to their full potential. This will not only
help to develop the economy, but it will also help to improve the quality of life. The financial situation
of taxpayers, but it also has a significant impact on the nation's economy. However, the government
should make an effort to increase employment opportunities for people from all walks of life. Due to the
fact that there is only a small percentage of the majority of the population pays taxes, although a small
percentage of the population evades their tax obligations by making fictitious income statements. To
address the issue of black money and tax evasion, all receipts, including agricultural income, should be
digitized. A proper mechanism for determining actual agricultural income for the purposes of exemption
should be devised.

Webliography

 https://incometaxindia.gov.in/Pages/acts/finance-acts.aspx
 https://corporatefinanceinstitute.com/resources/accounting/direct-taxeshttps://
www.bankbazaar.com/tax/indirect-tax.html
 https://www.cbic.gov.in/htdocs-cbec/gst/gstreadyreckoner
 https://wise.com/in/import-duty/
 https://pib.gov.in/newsite/PrintRelease.aspx?relid=186415
 https://wb.gov.in/acts/act_excise_excise_duty.pdf
 https://www.investopedia.com/terms/w/wealth-tax.asp
 https://pib.gov.in/PressReleasePage.aspx?PRID=1814822

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