Direct Taxes

Topic Title Session Topic & Subtopic Details

No.
Introduction 1 Introduction to the Taxation System in
to Direct Taxes India
 Origin and History of Taxation in
India
 Objectives of Tax Collection
 Characteristics of Efficient Tax
System
 Legal Framework
 Types of Taxes
 Methods of Taxation
 Tax to GDP Ratio
 Public
Expenditure

Public
Public Debt
Revenue

Public
Finance
Public & Private Finance
Income & Expenditure
Period
Satisfaction of Wants Sources of Revenue
Borrowings Printing of Currency
Balance of Income & Surplus budget
Expenditure Secrecy
Introduction to Taxation
Meaning of Tax :

• In this context the felicitous version of Justice

Holmes is worth–mentioning - “Taxes are what we
pay for civilized society. I like to pay taxes. With
them I buy civilization”.

Need for Collecting Tax:

• Development
• Civilization
• Revenue raised utilized to meet public expenditure
Origin of Income tax:

• The word 'Tax' originated from the word

'Taxation.' which means 'Estimate’

Need for understanding Tax laws:

• Aspiration to earn and desire to spend

both governs the need of knowledge of
taxation under the Government regulated
domain.
Objectives of Tax Collection

•Revenue
•Redistribution-Reduction of
inequality
•Accelerating Economic Growth
Levels of Redistribution

•Income Side
•Consumption Side
Principles of Tax System

•Horizontal Equity
•Vertical Equity
Efficiency of Tax System

•Potential to interact with the

economy
•Flexibility to modify as per
economic conditions
Administrative Simplicity

•Tax Computation
•Tax Collection/ Compliance
•Control on Tax Evasion
 Methods of Taxation

Progressive Proportional

Regressive
 Indian History- Tax and Economy
Nehru followed the path of state controlled industrialization, active
intervention, central planning and mandatory licensing of all
businesses

Policy of import substitution

Nehru created five year plans where targets were set and budgets
allocated in planned five year periods

Profit of more than 6% of capital+ reserves, a company was taxed

up to 60% of such excess profits.

Discouraged private sector investment. For a long time, it was

believed that anything foreign was bad. This created a tilt towards
public owned industry and a mentality of anti-capitalism that
survives till today.
 Indian History- Tax and Economy

Trade Deficit- Borrowings from RBI & abroad

Foreign aid stopped – Open Economy

The public savings rate was negative

 Indian History- Tax and Economy

Rising inflation- High oil prices

Rupee devaluation

High tax rates

Indian Airlines- Nationalized

Steel and Coal industries nationalized (exception

Tata Steel)
Automobile industry – Government support

Nationalization of banks
 Authority to Levy Tax
The authority to levy a tax is derived from the
Constitution of India which allocates the power to levy
various taxes between the Centre and the State.

An important restriction on this power is Article 265 of

the Constitution which states that "No tax shall be
levied or collected except by the authority of law.“

Therefore each tax levied or collected has to be backed

by an accompanying law, passed either by the
Parliament or the State Legislature.
The Central Board of Direct Taxes (CBDT) is a part of
the Department of Revenue in the Ministry of Finance,
Government of India.

The CBDT provides essential inputs for policy and

planning of direct taxes in India and is also responsible
for administration of the direct tax laws through
Income Tax Department.

The CBDT is a statutory authority functioning under

the Central Board of Revenue Act, 1963.
 Types of
Taxes

Direct Indirect
Taxes Taxes
 Three Tier Tax
Structure

Central Government State Government Local Government

Income tax, Customs , Professional tax ,

Property tax
GST GST
 Tax Collection by Central Government
9000

8000

7000

6000

5000

Direct Taxes
4000 Indirect Taxes

3000

2000

1000

0
 Tax Collection by State Government
10000

9000

8000

7000

6000

5000

4000
Direct Taxes
Indirect Taxes
3000

2000

1000

0
 Total Tax Collection
18000

16000

14000

12000

10000

8000 Direct Taxes

Indirect Taxes

6000

4000

2000