Income tax is the most common and important tax that an Indian must pay.and will be directly charged on income and the rate is charged varies, depending on the level of income.
Income tax is charged on an income known as taxable income
Taxable income = (total income) – (applicable deductions and exemptions).
In India, Income Tax is charged according to slabs which outline the details for different tax rates for different levels of income.
For domestic companies:
- The Corporate Tax rate for domestic companies is 30%.
- If the company does not have an income of over Rs.1 crore, then it no need to pay any corporate income tax.
- If the net income is in the range of Rs.10 crore, then surcharge of 5% is applicable.
- If the net income exceeds Rs.10 crore, a surcharge of 10% is applicable.
For international companies:
- That are earning less than 1 crore rupees, a corporate tax of 41.2% is applicable – inclusive of 40% basic tax and an education cess of 3%.
- That are earning more than 1 crore rupees, a corporate tax of 42.024% is applicable – inclusive of 40% basic tax, 3% education cess and a 2% surcharge.
- That are earning more than 10 crore rupees, a surcharge of 5% is applicable in addition to basic tax.
- Net wealth = (All assets) – (all debt).
- Valuation date for net wealth is 31st March preceding the assessment year.
- Wealth tax is charged at 1% of amount by which the net wealth exceeds Rs.15,00,000.
Capital Gains Tax
- Short term capital gains are taxed as per the normal income tax slab rates.
- Long term capital gains are taxed at 20% if computed with the benefit of indexation.
- Long term capital gains are taxed at 10% if computed without the benefit of indexation.
Direct taxes have an educative value as they create a sense among the taxpayers. Citizens realise their duty to pay taxes and because of the direct burden of taxes they become conscious on how the public income is spent by the government in a democratic country.