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Basic Concepts Of Income Tax

FR Prashanth Reddy
25/05/2017 1 4

Q: What is Tax ? 

Ans : It is an Amount which is payable by a person to the government so that govt can meet out of its certain expenses for which directly there are no charges.

For Example: Defense, hospitals, government schools, roads, etc.

Q:  Why is Tax ?

Ans : Tax is an amount payable to governemnet for various services provided by Government like:

  1. To create infrastructure facilities like roads, dams, bridges, water, power etc.
  2. Education.
  3. Health care.
  4. Defense requirement.
  5. Social welfare.

Q : What is the border classification of taxation system in india ?

Ans : Indian government collects both Directly and Indirectly Income Tax .

There are two major classification of Tax:

  1. Direct Tax
  2. Indirect Tax

Direct Tax: Direct Taxes are paid by the person Directly to the Government. The Person paying Taxes cannot pass its Burden on some other person.

              In case of Direct Tax Incidence and Impact will be on the same Person.

Examples: Income Tax & Wealth Tax.

Indirect Tax: Indirect Taxes are those taxes which the Tax payers pays Indirectly. The person paying the tax can recover from it from some other person. Therefore in case of Indirect Tax Incidence and Impact will be on some other person.

Examples: Service Tax, VAT(Value Added Tax), Exise/Custom duty, etc.

Difference Between Direct And Indirect Tax:

Direct Tax                                                                                  Indirect Tax


Tax paid directly to the Govt.

Tax paid indirectly to the Govt.

Burden cannot be passed.

Burden can be passed.

Taxability on source / resident basis.

Taxability on consumption basis.


Basis Of Taxation:

  1. Source basis
  2. Residence

Note 1: A person resident in India shall pay tax on all income whether Indian Income or Foreign Income.

Note 2: A person non-resident in India shall pay tax only on Indian Income and not on foreign income.

Note 3: India has entered into a agreement with different countries to avoid double taxation.

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Ramya Sudha Reddy | 07/06/2017

Thank you very much sir

0 0

VIJAY | 09/04/2017

Thank you very much Sir

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VIJAY | 09/04/2017

Thank you very much Sir

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Cherry | 29/03/2017

Simple and superb explaination

7 0

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