Taxation and Compliances Overview
Economies, like India, runs on funds which are arranged through taxes. Taxes in India are divided into two parts- Direct and Indirect taxes. It is the duty of every citizen of the country to duly pay taxes, thus, it becomes very important to have a thorough understanding of these taxes. While direct taxes are regulated by Central Board of Direct Taxes (CBDT), indirect taxes are regulated by Central Board of Indirect Taxes & Customs (CBIC). However, both fall under the purview of Ministry of Finance, Government of India. Here is a quick glance at what these taxes are:
What is Direct Tax?
Direct tax is a type of tax which is paid directly by the person liable to pay the tax to the Authorities. These taxes cannot be transferred to any other person. In India, direct tax is levied in the form of income tax which is regulated by Income Tax Act, 1961. It is the biggest source of revenue for the Indian Government. Every individual, business and corporate house is liable to pay these taxes, provided, their annual income exceeds a certain threshold limit.
What is Indirect Tax?
Contrary to direct tax, indirect taxes are levied on sale of goods and services. The seller of goods and services is liable to deposit these taxes to the Authorities. In India, the most popular law for indirect tax is Goods and Service Tax Act, 2017. In general, every seller whose turnover exceeds a given threshold limit in a financial year is liable for registration under this Act. GST contributes to nation building at State and National Level as GST collections are shared by State and Central Govt of India. Even import and export in certain conditions, attract Indirect Tax.
Advantages of Tax
1.) Equality: Indian taxes work on progressive basis i.e. higher tax rates are levied on higher income group people. Therefore, Indian taxes have been designed in a manner that higher income group people pay higher taxes and vice versa which brings equality between the two classes.
2.) Efficient Administration: As already discussed, taxes are the largest source of revenue for Indian Government. Thus, all the revenue collected is used in administration of the country. So higher the collection, better the administration.
Difference
| S.No. | Parameter | Direct Tax | Indirect Tax |
| 1.) | Applicability | It is levied on all individuals and business houses whose income exceeds basic exemption limit |
It is levied on business people whose turnover during the year exceeds the given threshold limit |
| 2.) | Rate | Slab rates are applied for different level of income | It is calculated as a fixed percentage of the selling price. |
| 3.) | Nature | It is Progressive in nature | It does not change with level of income |
| 4.) | Compliance | Annual return needs to be filed by all taxpayers | Monthly/ Quarterly returns need to be filed alongwith Annual returns in certain cases |
How does Aplite help?
Aplite is a group of Chartered Accountants and Company Secretaries providing all types of advisory and compliance related services under one roof. We deal in both, direct and indirect taxes. Our team comprises of dedicated tax advisors who leave no stone unturned to meet client’s expectations. We ensure timely and hassle-free services for all our clients. We provide Income Tax Return Filing Delhi and end-to-end taxation & compliance solutions for businesses. For more details about our services, please visit…
