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  • Aman Jaluka
  • 29-Apr-2019

TAX AND ITS CLASSIFICATION?

What is Tax?

Tax in simple term a fees  charged by a Government  either on a product, income or activity of the person. It is not a voluntary payment or donation, but an enforced contribution by government.

In simple words, tax is nothing but money that people have to pay to the Government, so that govt. can provide us public services.

 

Tax are basically classifed into Two  broad categories

1. DIRECT TAX

Direct tax is charged directly on person paying the tax and it is paid directly to the government by the person to whom it has been charged. It is basically PROGRESSIVE in nature.(progressive means any  individual living in india who falls within high slab rate  have to pay high tax and person having lower income  have to pay lower tax  according to  slabs rate mentioned by government for specified financial year).

2. INDIRECT TAX

This type of tax is  borne by the consumers who ultimately consume the product or the service.(consumer can be the person selling the goods or the person who is providing any services) It is basically REGRESSIVE in  nature (Regressive does not depend on the wealth of indivisual. Government will charged equal tax ,either he has higher income falling in higher slab rate or lower income falling in lower slab rate. Government will earn equal amount of taxes from both group of people either he is from rich class or from poor class living in a society)

 

EXAMPLES ON DIRECT AND INDIRECT TAX

An individual having annual income of 10 lakh rupees have to pay tax to govt directly on 10 lakh on the slab rate specified by the govt comes under the example of DIRECT TAX.

A service given by doctor to his patient and  if the amount charged by him is 2000 rupees and if 18 percent tax rate is applicable than (2000*18%) 360 rupees, Hence, the money paid by doctor to the government comes under the example of indirect tax