WHAT ARE TAXES?
A tax is a compulsory fee imposed by any government on an organization to collect revenue for public works supplying the best facilities and infrastructure. The fund that is collected is utilized to fund different public expenditure programs.
In India, there are prominently two types of taxes direct tax and indirect tax.
DIRECT TAX
A direct tax is directly given to the government.
While indirect tax includes value-added tax, service tax, goods and services tax, customs duty, etc. From the government outlook estimating taxes is relatively easy as there is a direct correlation to the income of the registered taxpayers. The direct tax includes income tax, gift tax, capital gain tax, etc.
Corporate tax
Such tax is imposed on domestic companies that are distinct from the shareholders. The tax is also due to foreign corporations whose income emerges in India. Income earned as interest, royalties, dividends, technical services fees, or gains through the sale of benefits based in India is dutiable. The corporate tax also includes the following:
Minimum Alternate Tax (MAT)
Imposed on zero-tax companies whose accounts are assembled as per the instruction of the Companies Act.
Fringe Benefits Tax
These taxes are paid by companies on fringe benefits that are provided to employees.
Wealth tax
Property owners should pay the tax disregarding of whether the property earns them any income or not. According to, the residential status of the taxpayers, wealth tax is payable by individuals, and corporate taxpayers. In addition, working assets like stock holdings, gold deposit bonds, house property, etc, and house property owned for business use are excused from paying wealth tax.
Capital gains tax
Capital benefits include investments in homes, art, businesses, shares, bonds, and farms. Capital obtained is planned as the contrast between the sale value and the purchase value of these assets. This tax is restricted as either short-term or long-term based on its property period. All assets that are sold within 36 months of investment are responsible clasp for short-term gains. Gains made along the sale of assets that are for more than 36 months are long-term assets.
INDIRECT TAX
Indirect taxes are based on consumption that is related to goods or services. This tax is not paid directly to the government as they are received by the government or seller of goods and services. Indirect tax includes value-added tax, service tax, goods and services tax, customs duty, etc.
Service Tax
Service tax is relevant to the services provided by a company and paid by the receiver of their services, controlled by and placed with the central government.
Value Added Tax
Value Added Tax(VAT) is charged on the sale of portable goods or goods sold right to the customers. Value Added Tax is required by the separate state governments on intra-state sales.
Custom Duty
Custom duty is relevant to the goods which are imported into India from other countries. In some cases, it is also imposed on the goods that are exported.
Excise Duty
Excise duty is imposed on the goods manufactured in India, this is paid by the manufacturers of different goods. Excise duty is often retrieved from the customers.
Securities Transaction Tax
Securities Transaction Tax is imposed at the time of trade of certainly through Indian Stock Exchange.
Goods and Service Tax
Goods and service tax popularly known as GST has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.
In other words, goods and service tax is imposed on the supply of goods and services.GST is a single private indirect tax law for the entire country. It has mostly removed the descending effect on the sale of goods and services. It has improved and made tax administration convenient with the Central Government determining the rates and policies. It has greatly reduced the consent burden on taxpayers and relieved tax administration for the government.
IMPORTANCE OF TAXES
The money that is collected by the government is known as tax revenue and may be utilized for an inclusive spectrum of motives such as infrastructure development in the form of roads, railways, bridges, dams, etc. public healthcare and education, defense and civil services, etc. According to the 2018-19 India’s tax to-GDP, ratio 9 was 10.9%. A high tax-to-GDP ratio manifests that the government has the capability to manage its spending productively without depending on surplus borrowing. In comparison, India’s low figures could be expressive of the reduced accumulation of service taxes, approximately high GDP growth as well as income tax eluding widespread among large corporations and the upper class of the society.
In addition, taxes help raise the standard of living in a country hence it makes the country stronger and higher the level of expenditure most likely is. Also, with a higher standard of living, businesses would be confident of a higher domestic expenditure as well. Taxes are crucial and play a vital role, every citizen has access to the benefits from these taxes. This is the reason it is important that citizens aspire to pay taxes and acknowledge that is for their services and betterment only.
According to estimates, around 5.8 crore people have filed their remit so far. Also, around 1–2 crore people have paid their taxes but haven’t filed the returns yet. It’s seen that a meagerly 5% of Indians actually pay tax.
According to some estimates, only 3% of Indians take home a yearly salary of more than ₹5 lakhs. In fact, the top 10% of Indians have a yearly income of just ₹3 lakhs. In addition, the ₹5 lakhs verge is relevant as the government has spared all those who have income less than ₹5 lakhs.
WHAT IS THE NEW TAX REGIME?
Income Tax Slabs( in precise Individual taxpayers will need to pay the income tax based on the slab system they fall in as the slab system is evaluated every year) in India are announced every year by the finance minister. A person with a higher income will need to pay more taxes. The slab system was basically introduced to continue a fair tax system in the country. There are two different Income Tax regimes. Both the new regime and the old regime taxpayers comparatively the old regime have a little more benefits.As In case a taxpayer has investments in tax-saving insurance.It pays surcharge medical or insurance policy, home loan principal repayment, etc., and assists the benefit of the deduction for HRA, LTA, etc and the person is eligible to declare for deductions or exemptions under the old tax regime towards HRA(house rent allowance), LTA(leave travel allowance), PPF(public provident fund), etc it may be more beneficial.
Whereas, the new tax regime allows a standard deduction of INR 50,000 for compensated persons and a reduction for family pension being lower of INR 15,000 or 1/3rd of the pension.
On 1 February 2023, finance minister Nirmala Sitharaman announced the Union budget for 2023 on 1 February 2023.
The finance minister announced that under the new tax regime, the refund for income tax has been increased to Rs.7 lakh from the earlier limit of up to Rs.5 lakh. Some minute changes are there in the tax slab for the new tax regime. The surtax rate on income of Rs.5 crore and above has been reduced from 37% to 25%.In addition, exemption limitation in the new tax regime has been increased to INR 3 lakh as earlier it was INR 2.5 lakh.
WHAT ARE PANDORA PAPERS?
Pandora papers were 11.9 million leaked files from 14 global collective services firms which set up about 29,000 off-the-shelf companies and private beliefs in not just uncertain tax authorities but also countries such as Singapore, New Zealand, and the United States, for clients across the world. Few of the investments made by the people revealed in the Pandora Papers leak have been done to avoid taxes, they are not unlawful if the required announcement has been made to the relevant authorities.
Famous performers Elton John, Ringo Starr, Jackie Chan, Bono, Julio Iglesias, and Shakira were labeled in the papers. Lawyers from many of these celebrities have asserted that no wrongdoing was done and that appropriate revelation and taxes have been filed on all offshore finances.
The prime minister of the Czech Republic went bankrupt to disclose that the coastal investment company used to purchase a gorgeous property on the French Riviera for $22 million.
The documents have exposed over 300 Indians, including those accused of economic crimes, and former members of Parliament, and those are tracked by investigation agencies.
According to a report by the Indian Express, which was part of the organization, businessman Anil Ambani has 18 assets holding offshore companies in spite of declaring bankruptcy in a UK court. It revealed that Nirav Modi’s sister established a trust just a month before the jollier fled the country.
Also, the report raised that Sachin Tendulkar, the cricketer, was amidst individuals who demanded the liquidation of his offshore entity after the Panama leak. (The Panama Papers are 11.5 million leaked documents that were published beginning on April 3, 2016. The paper details financial and attorney-client details for more than 214,488 offshore organizations)
Corporate lobbyist Niira Radia has allegedly set up around 12 firms, directing her offshore transactions through Sanjay Newatia.
In the year 1995, Satish Sharma(former congress leader) set up a trust when he was Petroleum and Natural gas, minister. In 2015, he also set up another trust when he was a Rajya Sabha member.
Kiran Mazumdar Shaw‘s husband, a British Citizen, has allegedly set up an organization that holds 19.76% of Biocon and has $85 million in various assets, including cash and real estate.