NATURE

&
CHARACTERISTICS
OF TAXATION IN INDIA
Exploring the Taxing Tales of India
BY: DEEPAK R. TONGLI
ADVOCATE & FACULTY OF LAW
AN OVERVIEW OF TAXATION
• Taxation in India refers to the process of imposing taxes by the
government on individuals and entities in order to generate revenue,
redistributive wealth, and finance public expenditures.
• Taxes are revenues to the government.
• Taxes are used to regulate production and consumption (economic)
activities.
• Taxes are used to bring distributive justice.
NATURE OF TAXATION
I. Imposition of Taxes
II. Legal Authority
III. Compulsory Payment
IV. Non Quid-Pro-Quo
V. Redistribution of Wealth
VI. Revenue Generation
NATURE- 1: IMPOSITION OF TAXES

Imposition of Taxes refers to the legal authority

of the government to enforce compulsory
payment from Individuals and Businesses
without a direct quid pro quo, for the purpose
of redistributing wealth and generating
revenue for the state exchequer.
NATURE- 2: LEGAL AUTHORITY

Legal Basis for Taxation in India: The legal authority

behind Taxation in India is derived from the
Constitution of India, which grants the power to
impose and collect Taxes to the Central and State
governments, as well as from various tax
legislations and acts enacted by the government.
NATURE- 3: COMPULSORY PAYMENT

Understanding the Obligatory Nature of Tax

Payment: It refers to the Mandatory requirement
imposed by the government for individuals and
businesses to pay taxes, ensuring the financial
resources necessary for the functioning of public
services and infrastructure.
NATURE- 4: NON-QUID PRO QUO

It refers to the principle that taxes are not

directly linked to specific benefits or services
provided by the government, but rather serve
as a compulsory payment by the taxpayers
towards the overall functioning and welfare of
the society as a whole.
NATURE- 5: REDISTRIBUTION OF WEALTH

It refers to the government’s efforts to adjust

the distribution of income and wealth among
individuals through the collection of taxes and
the provision of public services and welfare
programs.
NATURE- 6: REVENUE GENERATION

It is the primary purpose of taxation, as it

provides the government with the necessary
funds to finance public expenditures and
provide essential services to its citizens. It is the
Nationals Source of Funds.
CHARACTERISTICS OF TAXATION
I. Progressive Taxation in India
II. Direct and Indirect Taxes
III. Multiple Taxes
IV. Taxation of Different Entities
V. Administrative Machinery
CHARACTERISTICS-1: PROGRESSIVE TAXATION

It is a system where the Tax Rate increases as

the Income of the taxpayer increases, allowing
for a fair and equitable distribution of the tax
burden based on ability to pay.
CHARACTERISTICS-2: DIRECT & INDIRECT TAXES

Direct Taxes are levied on individuals and

entities based on their income or wealth.
Indirect Taxes are imposed on the production,
sale, or consumption of goods and services
ultimately impacting the final consumer.
CHARACTERISTICS-3: MULTIPLE TAXES

It refers to the existence of various forms of taxes

imposed on individuals and entities, including
income tax, sales tax, service tax, excise duty, and
customs duty, among others, which collectively
contribute to the revenue generation and
redistribution of wealth for the government.
CHARACTERISTICS-4: TAXATION OF DIFFERENT
ENTITIES

Different entities in India, such as Individuals,

Companies, and Partnership firms, are
subjected to taxation based on their respective
legal structure and sources of income.
CHARACTERISTICS-5: ADMINISTRATIVE MACHINERY

Administrative Machinery involved in taxation

in India consists of various government
agencies and departments that are responsible
for the implementation, collection, and
enforcement of taxes such as CBDT, CBIC,
among others.
CHARACTERISTICS-5: ADMINISTRATIVE MACHINERY

Administrative Machinery involved in taxation

in India consists of various government
agencies and departments that are responsible
for the implementation, collection, and
enforcement of taxes such as CBDT, CBIC,
among others.
TYPES OF TAXES
TYPES OF TAXES
DIRECT TAXES
A Direct tax is a kind of charge, which is imposed
directly on the taxpayer and paid directly to the
government by the person or entity (juristic or
natural) on whom it is imposed. A direct tax is one
that cannot be shifted by the taxpayer to someone
else. Direct taxes are mainly taxes on income,
property, capital gains, wealth and expenditure.
INDIRECT TAXES
An indirect tax is a tax collected by an intermediary
(such as a retail store) from the person who bears the
ultimate economic burden of the tax (such as the
customer). Indirect taxes are taxed on goods and services.
An indirect tax is one that can be shifted by the
taxpayer to someone else. An indirect tax may increase
the price of a good so that consumers are actually paying
the tax by paying more for the products.
 Centre

Direct Tax Indirect Tax

Corporate income tax, CGST share from GST/IGST,

Personal income tax Customs Duties and Excise
duties on petroleum
,Capital gains tax, Gift tax,
products, Cess and surcharges
Inheritance tax, and
surcharges.

6
 State

Direct Indirect

Agricultural income State Excise Duties, SGST

tax, profession tax, Component from
land revenue (the last GST/IGST. (Bulk of the state
two are transferred to tax revenue comes from
Local Bodies). indirect taxes).
7
TAX BASE
The tax base is the legal description of the
object to which the tax applies, such as – net
income of an individual, value of a property etc. For
example, the tax base of an income tax payer is
his net income.
TAX ELASTICITY
It refers to changes in tax revenue in
response to changes in tax rate. For example, how tax
revenue changes if the government reduces
corporate income tax from 30 per cent to 25 per
cent indicate tax elasticity.
TAX BUOYANCY
Tax buoyancy explains the relationship
between the changes in government’s tax
revenue growth and GDP growth rate. It refers
to the responsiveness of tax revenue growth to
changes in GDP. When a tax is buoyant, its
revenue increases without increasing the tax rate.
SURCHARGE
Surcharge is a charge on any tax, charged on the tax
already paid. As the name suggests, surcharge is an
additional charge or tax. The main
surcharges are that on personal income tax (on
high income slabs and on super rich) and on
corporate income tax.
CESS
A cess imposed by the central government is a tax on
tax, levied by the government for a specific
purpose. Generally, a cess is expected to be levied
till the time the government gets enough money for
that purpose.
RECENT INITIATIVES AND IMPACT ON TAXATION

• Demonetization
• Compulsory PAN-Aadhar linkage
• Restriction on physical cash payment
• Introduction of GST.
 NEXT CLASS
CONSTITUTIONAL PROVISIONS