What is Taxation?
Taxation is a term for when a taxing authority, usually a government, levies or imposes a tax. The term "taxation" applies to all types of involuntary levies, from income to capital gains to estate taxes. Though taxation can be a noun or verb, it is usually referred to as an act; the resulting revenue is usually called "taxes."
Many assume that the filing of tax returns is a harrowing experience. There are some myths associated with these filings. A common fear is that the taxman comes knocking at the door if the tax returns is filed. The fact remains that each individual having taxable income has an obligation to file his/her incometax returns for the relevant financial year. The finance minister recently indicated that salaried employees earning below Rs 5 lakh and not having any other sources of income would be exempt from filing the income-tax returns.
The due date for filing tax returns by individuals depends on the category one belongs to. In case of individuals whose accounts are required to be compulsorily audited, the return is to be filed by 30 September. For the rest, July 31 is the due date.
10 Main Features of Indian Tax Structure 1. The Scientific Division of Tax Powers: India being a federation, there is the existence of a multi-level finance system.
(a) Union,
(b) State, and
(c) Concurrent.
Based on this the constitution has also made a provision for division of tax powers between the centre and the states.
The area and sphere of taxation of centre and state is clearly demarcated as per constitutional provision. Taxes which are in the purview of central government accounted for 50 percent of its revenue. Some taxes are again levied by the Central government and the proceeds of such taxes are divided between the centre and the state governments.
2. Multiplicity of Tax Structure:
India is having a broad based and extensive tax structure. Its main feature is the existence of multiplicity of taxes. There are both union government taxes and state government taxes. The tax structure includes both dried and indirect taxes.
In the case of states indirect taxes play a dominant role, in the composition of tax revenue. Among the direct taxes imposed in India, the most important is income tax. Other prominent taxes are wealth tax capital gains tax, gift tax etc.
3. Larger share of Indirect Taxes:
In India in the total tax revenue there is the domination of indirect taxes over direct taxes. Indirect taxes shared 63% in 1950 – 51 where it increased to 77% in 2001-02. If shows that because of the undeveloped character of the economy and glaring inequality in income, the scope of direct taxes is limited.
4. Insufficient Tax Revenue:
In-spite of rising trend in tax revenue, the total revenue remained small when compared to developed countries. The tax GDP ratio generally remained in the range of 8 percent to 9 percent in India (E. Survey 2005-06) where as it is very high in countries like Sweden, France, West Germany, UK, USA, etc. where the share ranges between 30 to 40 percent.
5. Greater Importance to Sate Government in Federal Fiscal System:
In Indian fiscal federalism much importance is assigned to state governments. The field within which tax revenue, are raised and spend regularly is very wide in India when compared to many federal governments.
6. Incidence of Taxation:
In India the incidence of taxation is much higher in urban areas than in rural areas this is because of the predominance of agriculture in rural area and low income of rural households.
7. Progressiveness in Tax Structure:
Indian tax structure is framed in such a way that all indices of ability to pay is taxed. The direct tax is framed in such a way that as tax base increases, tax rate also rises sharply. Excise duties are levied and collected discriminately, depending on the type of commodity and the class of consumers.
8. Narrow Base:
Fiscal experts opine that the tax base is very narrow in India in the case of both direct and indirect taxes. A planning commission estimate shows that only one percent of working population comes under the preview of direct tax.
9. Complexity of Indian Tax Laws:
With the intension of broad based tax system, a plethora of changes have been introduced in the tax structure.
10. Integration between Centre and Sate Revenue:
After independence concrete efforts were made to organize the tax structure scientifically in tune with the requirements of a federal set of government. At present there is well-organized machinery for the collection distribution and expenditure of the revenue.
