Professional Documents
Culture Documents
Taxation
Taxation
Direct Tax:
It is levied directly on individuals and corporate entities. This tax cannot be transferred
or borne by anybody else. Examples of direct tax include income tax, wealth tax, gift
tax, capital gains tax.
Income tax is the most popular tax within this section. Levied on individuals on the
income earned with different tax slabs for income levels. The term ‘individuals’ includes
individuals, Hindu Undivided Family (HUF), Company, firm, Co-operative Societies,
Trusts.
Indirect Tax:
These are taxes which are indirectly levied on the public through goods and services.
The sellers of the goods and services collect the tax which is then collected by the
government bodies.
Value Added Tax (VAT)– A sales tax levied on goods sold in the state. The rate
depends on the government.
Octroi Tax– Levied on goods which move from one state to another. The rates
depend on the state governments.
Customs Duty– It is a tax levied on anything which is imported into India from a
foreign nation.
India offers a well-structured tax system for its population. Taxes are the largest
source of income for the government. This money is deployed for various
purposes and projects for the development of the nation.
Taxes are determined by the Central and State Governments along with local
authorities like municipal corporations. The government cannot impose any tax
unless it is passed as a law.
Here are the salient features of the taxation system in India:
2. Types of taxes
Taxes are classified under two categories namely direct and indirect taxes. The
largest difference between these taxes is their implementation. Direct taxes are
paid by the assessee while indirect taxes are levied on goods and services.
o A) Direct taxes
Income tax
As per the Income Tax (IT) Act, 1961 every assessee whose
total income exceeds the maximum exempt limit is liable to
pay this tax. The tax structure and rates are annually
prescribed by the Union Budget. This tax is imposed during
each assessment year, which commences on 1st April and
ends on 31st March. The total income is calculated from
various heads such as business and profession, house
property, salaries, capital gains, and other sources. The
assesses are classified as individuals, Hindu Undivided Family
(HUF), association of persons (AOP), body of individuals (BOI),
company, firm, local authority, and artificial judiciary not
falling in any other category.
o B) Indirect taxes
Sales Tax
Entertainment Tax
Octroi
Service Tax
Purchase Tax
It is a multi-stage destination-based tax. Multi-stage because it is levied on each stage
of the supply chain right from purchase of raw material to the sale of the finished
product to the end consumer whenever there is value addition and each transfer of
ownership.
Destination-based because the final purchase is the place whose government can
collect GST. If a fridge is manufactured in Delhi but sold in Mumbai, the Maharashtra
government collects GST.
CGST- Stands for Central Goods and Services Act. The central government
collects this tax on an intrastate supply of goods or services.
(Within Maharashtra)
SGST: Stands for State Goods and Services Tax. The state government
collects this tax on an intrastate supply of goods or services.
(Within Maharashtra)
IGST: Stands for Integrated Goods and Services Tax. The central government
collects this for inter-state sale of goods or services.
3. Revenue Authorities
CBDT
The Central Board of Direct Taxes (CBDT) is a part of the
Department of Revenue under the Ministry of Finance. This body
provides inputs for policy and planning of direct taxes in India and is
also responsible for administration of direct tax laws through the
Income Tax Department.
CBEC
The Central Board of Excise and Customs (CBEC) is also a part of
the Department of Revenue under the Ministry of Finance. It is the
nodal national agency responsible for administering customs,
central excise duty and service tax in India.
CBIC
Under the GST regime, the CBEC has been renamed as the Central Board of
Indirect Taxes & Customs (CBIC) post legislative approval. The CBIC would
supervise the work of all its field formations and directorates and assist the
government in policy making in relation to GST, continuing central excise levy
and customs functions.
The Indian taxation system in India has witnessed several modifications over the
years. There has been standardization of income tax rates with simpler
governing laws enabling common people to understand the same. This has
resulted in ease of paying taxes, improved compliance, and enhanced
enforcement of the laws.
Since then, the tax structure in the country has undergone revival with
abolitions and amendments as well as additions of new reforms. Let’s have a
look at the current aspects of taxation system in India.
In addition, the local governing and civic bodies too have the right to
levy certain taxes.
Types of Taxes
Direct Taxes: These taxes are directly paid by the individuals to the
respective governments. The most important examples include income tax,
capital gains tax, perquisite tax, corporate tax and securities transaction tax.
Indirect Taxes: These taxes are not directly paid to the governments
but are collected by the intermediaries who sell or arrange products and
services. Service tax, sales tax, octroi, customs duty, value added tax and
excise duty are some of the top examples.
Central Board of Direct Taxes (CBDT): Plans and administers the direct
taxes
Goods and Service Tax (GST): Passed in 2016, but levied in July,
2017, GST brings various indirect taxes levied by the Central and the State
Governments under a single comprehensive indirect tax.
Central Board of Indirect Taxes and Customs (CBIC): Another
important development was renaming CBEC to CBIC under the newly-levied
GST.
The Government of India penalizes offenders, who don’t pay taxes, through
penalties ranging from fines to imprisonment. Paying taxes on time and with
honesty is indeed beneficial for all.
UK tax system-
The tax system in the United Kingdom is not easy to explain to foreigners.
Arguably UK has the longest tax code in the world since 2009. Then international
legal research company LexisNexis revealed their finding that the UK tax code
has more than doubled in size since 1997, reaching 11,520 pages. The annual
changes to tax and duty form a law called the Finance Act, which may change
the tax rates and principles set out in the main tax acts
The predecessor of the VAT from 1940 to 1973 was the purchase tax. The rate of
purchase tax at the start of 1973 was 25%. The VAT standard rate has been
increased from 10% after its introduction in 1973, when the UK joined European
Economic Community, to 20% effective from January 2011.
VAT returns are submitted every three months; those periods are called “VAT
accounting periods”. These quarterly VAT returns should only be submitted
online. Businesses can choose their VAT accounting period when registering for
VAT with HM Revenue & Customs. It is possible to file VAT returns online
although it is safer to let qualified accountants do it.
The filing and payment deadline of quarterly returns is 1 calendar month and 7
days after the end of a VAT accounting period. One must be aware that the 7th
date of the second month after the end of the VAT accounting period is the
deadline for the HMRC to receive the payment and not to make the payment.
A limited company must file annual accounts with Companies House 9 months
after the company’s financial year ends at the latest. A limited company with
profits up to £1.5 million normally must pay corporation tax 9 months and 1 day
after the company’s accounting period ends and file a company tax return 12
months after the company’s financial year ends. Four equal instalments are
normally required for profits exceeding £1.5 million.
Businesses must pay the PAYE bill to HM Revenue and Customs by the 22nd of
the month for all the salaries paid the previous month. A month is defined not as
a calendar month but as a period between the 6th date of the month and the 5th
date of the following month. Small employers that expect to pay less than £1,500
a month can arrange to pay quarterly. Please note that reports must be sent to
HMRC before any payments to employees are made.
Employees in pension schemes that are not contracted out, form categories A, B,
C and J. Employees in a contracted-out workplace pension scheme form
categories D, E, C and L. Most employees fall into category A or D.
It is important to note that any business must have the Employers’ Liability (EL)
insurance as soon as they become an employer. The insurance policy must cover
the business for at least £5 million and come from an authorised insurer. EL
insurance will help the business pay compensation if an employee is injured or
becomes ill because of the work.
For earned income of £0 to £32,000 above the personal allowance, which means
£11,000 to £43,000 of gross earned income, the basic income tax rate is 20%.
The higher rate of 40% applies when the earned income is £32,001 to £150,000
above the personal allowance. There is an additional 45% rate for gross income
exceeding £150,000. There are different tax rates for dividend and savings
income.
Business rates
Business rates are based on the Local Government Finance Act 2012 and other
acts. Business rates, which are also called non-domestic rates, are a kind of a
property tax introduced in England and Wales in 1990. It is a tax on the
occupation of non-domestic property and it has increased by 7% since 2010.
Tenants such as offices and shops usually pay this directly to the local council if
it is not part of the rent paid to the landlord.
All non-domestic property occupiers should register with their local council even
if the business rates are included in the rent. Business rates are based on
property occupation and don’t reflect the turnover or profits of the business. If a
foreign company plans to have business premises in the UK, it is important to
consider it in financial planning.
Properties are in a national rating list by rateable value (also RV). This is a
valuation of their annual rental value on a fixed valuation date based on
assumptions. It is not the current market price or the price agreed in the tenancy
agreement. The next revaluation date was postponed to 2017 by the government
and currently the valuation data is based on the 2010 assumptions.
For the 2016/17 financial year the national small business rate relief (SBRR)
multiplier was 48.4% (0.484) and the standard rate multiplier 49.7% (0.497).
Local councils can set a special levy (also called business rate supplement or
BRS) on top of the national rates. In Greater London area the BRS is 2% (0.020).
Business rates payments are calculated by multiplying the rateable value by the
business rates multiplier, which is set by the government. For example, a small
business with a rateable value of £10,000 in England must pay £4840 or 48.4% of
the rateable value as a local tax each year.
The local council will send an invoice to businesses registered for business rates
in February or March of each year. The invoice is for the following tax year.
Businesses might be able to pay their bill in 12 instalments.
If you are a small business owner, you might be eligible for rate relief through the
government’s Small Business Rate Relief Scheme (SBRR)
In England, you can get a small business rate relief if you only have one property
with a rateable value of less than £12,000 (Year 2016/17). If your property has a
rateable value of £6,000 or less you will be get 100% relief from business rates.
The percent figure will gradually decrease from 100% for properties with a
rateable valued between £6,001-£12,000.
You can still qualify as a small business if your property has a rateable value of
below £18,000 or £25,500 for greater London. In this case your business rates
will be calculated using the small business multiplier instead of the standard
multiplier. The standard multiplier for small business in England for 2016-17 is
49.7% (0.497)
Households pay a similar tax called council tax. Anybody over 18 years old and
not a full-time student, renting or owning a home in the UK, must pay council tax.
Council tax is a tax on domestic property collected by your local council. The
money is used to pay for local services such as schools, rubbish collections, road
and street lighting
2.
3.UK
Basic UK taxes include income taxes, property taxes, capital gains taxes, UK Inheritance Tax and Value
Added Tax (VAT).
3.INDIA
1) Income Tax
2) Corporate Tax
3) Wealth Tax
5) Perquisite Tax
4.the Indian tax year starts from 1st april to 31st march
5. In 2015-2016, the gross tax collection of the Centre amounted to ₹14.60 trillion (US$200 billion).
india
5.
GST will mainly remove the Cascading effect on the sale of goods and services.
Removal of cascading effect will directly impact the cost of goods and it will
decrease.
GST is also technologically driven. All activities like registration, return filing and
response to notice needs to be done online on the GST Portal. This will speed up
the processes.