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Direct And Indirect Taxes In India

31 October, 2015

Running a country is definitely not a child’s play. It takes a great set of deserving people who are wise enough to administer everything related to the country. There are many administrative bodies which take care of various aspects of running a society. There are experienced people who just know how to take the country forward in all sectors to develop the country as a whole. But, having administrators and administrative bodies wouldn’t just be enough as it requires one more important aspect. That is nothing but the money.

Money is of utmost importance to run a country and all of this can’t be generated through trades. That is when collecting taxes comes to picture. Tax is some amount of money collected by a government for its support or for certain facilities or services they provide to the citizens. The amount of tax usually depends on the income, property or sales of the citizen. There are various types of taxes which are collected by the government for the smooth run of administration. There are also punishments to those who refuse to pay taxes or skip paying the taxes. Here, in India, there are mainly two important types of taxes. Direct and indirect taxes. Since India has a large population, these taxes are very crucial.

Direct And Indirect Taxes In India

In India, various types of taxes can be classified under two heads primarily i.e., direct taxes, indirect taxes. The difference lies in terms of the body that collect the various kind of taxes i.e., the state government, union government or the municipalities.

  • Direct Taxes

These taxes are termed as Direct Taxes since they are directly collected by the government of India. A recent survey clearly states that the Indian economy is recording a constant increase in terms of the collection of this type of tax in the recent years. This has led to an increase in the tax rate too, thereby indicating an over all hike in the Indian economy and an improved administration. Some of the common types of direct taxes are Corporate tax, Double Tax Avoidance Treaty, Securities Transaction Tax etc.

  • Indirect Taxes

Just contrary to the Direct taxes, the indirect taxes are basically charged on some particular goods, services and not on any specific perfect or may be an organization. Some of the indirect taxes include the Custom duty, Sales Tax, Excise Duty, Anti Dumping duty, Value Added Tax etc. The role of indirect taxes ranges from the actual production of the goods till the consumption i.e., it comprises of various activitites like production, import, trading and consumption. One parameter that must be taken into account regarding Indirect Taxes is that they may change from state to state i.e., indirect taxation policy existing in one particular state might not be the same for the other state.

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