Income tax

An income tax is a tax levied on the income of individuals or businesses

(corporations or other legal entities).

Various income tax systems exist, with varying degrees of tax incidence.

Income taxation can be progressive, proportional or regressive.

When the tax is levied on the income of companies, it is often called a

corporate tax, corporate income tax, or profit tax.

Individual income taxes often tax the total income of the individual (with

some deductions permitted), while corporate income taxes often tax net
income (the difference between gross receipts, expenses, and additional
write-offs).
Various systems define income differently, and often allow notional reductions

of income (such as a reduction based on number of children supported).

Types
Personal
Corporate
Payroll
Inheritance
Capital gains tax

Personal Income Tax

A personal or individual income tax is levied on the total income

of the individual (with some deductions permitted).

It is often collected on a pay-as-you-earn basis, with small
corrections made soon after the end of the tax year.
These corrections take one of two forms:
payments to the government, for taxpayers who have not paid

enough during the tax year;

and tax refunds from the government for those who have overpaid.

Income tax systems will often have deductions available that

lessen the total tax liability by reducing total taxable income.

They may allow losses from one type of income to be counted
against another. For example, a loss on the stock market may
be deducted against taxes paid on wages.

Corporate Income Tax

Corporate tax refers to a direct tax levied on

the profits made by companies or associations

and often includes capital gains of a company.
Earnings are generally considered gross
revenue minus expenses.
Corporate expenses related to capital
expenditures are usually deducted in full over
their useful lives by using percentage rates
based on the class of asset they belong to.

Payroll Income Tax

A payroll tax generally refers to two kinds of taxes: employee and employer

payroll taxes.
Employee payroll tax:
Employee payroll taxes are taxes which employers are required to withhold from
employees' pay, also known as withholding, pay-as-you-earn(PAYE) or pay-as-yougo(PAYG) tax.
These withholdings contribute to the payment of an employee's personal income tax
obligation;
if the payments exceed this obligation, the employee may be eligible for a tax-refund
or carry forward to future periods.
Employer payroll taxes:
Employer payroll taxes are paid from the employer's own funds, either as a fixed
charge per employee or as a percentage of each employee's pay.
Payroll taxes often cover government social insurance programs, such as social
security, health care, unemployment and disability.
These payments do not count toward the income taxes of employees and employers,
but are normally deductible by the employer as a business expense.

Inheritance Tax
The inheritance tax, estate tax and death

duty are the names given to various taxes

which arise on the death of an individual.
In international tax law, there is a distinction
between an estate tax and an inheritance tax:
the former taxes the personal representatives

of the deceased, while the latter taxes the

beneficiaries of the estate.

Capital gains tax

A capital gains tax is the tax levied on profits

from the sale of capital assets.

In many cases, the amount of a capital gain is
treated as income and subject to the marginal
rate of income tax.

Sales Tax
A sales tax is a consumption tax charged at the point of

purchase for certain goods and services.

The tax amount is usually calculated by applying a percentage
rate to the taxable price of a sale.
A portion of the sale may be exempt from the calculation of tax,
because sales tax laws usually contain a list of exemptions. Laws
governing the tax may require it to be included in the price (
tax-inclusive) or added to the price at the point of sale.
Most sales taxes are collected from the buyer by the seller, who
remits the tax to a government agency.
Sales taxes are commonly charged on sales of goods, but many
sales taxes are also charged on sales of services. Ideally, a sales
tax would have a high compliance rate, be difficult to avoid, and
be simple to calculate and collect.

Types of sales tax

Gross receipts taxes, levied on all sales of a business. This tax has been

criticized for its "cascading" or "pyramiding" effect, in which an item is taxed

more than once as it makes its way from production to final retail sale.
Excise taxes, applied to a narrow range of products, such as gasoline or alcohol,
usually imposed on the producer or wholesaler rather than the retail seller.
Use tax, imposed directly on the consumer of goods purchased without sales
tax, generally items purchased from a vendor in another state and delivered to
the purchaser by mail or common carrier. Use taxes are commonly imposed by
states with a sales tax, but are difficult to enforce on consumers, except for large
items such as automobiles and boats.
Securities turnover excise tax, a tax on the trade of securities.
Value added taxes, in which tax is charged on all sales, thus avoiding the need
for a system of resale certificates. Tax cascading is avoided by applying the tax
only to the difference ("value added") between the price paid by the first
purchaser and the price paid by each subsequent purchaser of the same item.
Turnover tax, similar to a sales tax, but applied to intermediate and possibly
capital goods as an indirect tax.

Excise Duty
Central Excise duty is an indirect tax levied on those goods

which are manufactured in India and are meant for home

consumption.
The taxable event is 'manufacture' and the liability of
central excise duty arises as soon as the goods are
manufactured.
It is a tax on manufacturing, which is paid by a
manufacturer, who passes its incidence on to the
customers.
The term "excisable goods" means the goods which are
specified in the First Schedule and the Second Schedule to
the Central Excise Tariff Act,1985 , as being subject to a
duty of excise and includes salt.

Importance of Central Excise

Duty
Central excise revenue is the biggest single source of revenue for

the Government of India.

The Union Government tries to achieve different socio-economic
objectives by making suitable adjustments in the scope and
quantum of levy of Central Excise duty.
The scheme of Central Excise levy is suitably adapted and modified
to serve different purposes of price control, sufficient supply of
essential commodities, industrial growth, promotion of small scale
industries and like Authority for collecting the Central Excise duty.
Article 265 of the Constitution of India has laid down that both levy
and collection of taxes shall be under the authority of law. The excise
duty is levied in pursuance of Entry 45 of the Central List in
Government of India Act,1935 as adopted by entry 84 of List I of the
seventh Schedule of the Constitution of India. Charging section is
Section 3 of the Central Excises and Salt Act,1944.

Liability to pay Central Excise

Duty
Section 3 of the Central excises and Salt Act,1944 provides

that there shall be levied and collected in such manner as

may be prescribed, duties of excise on all excisable goods
other than salt which are produced or manufactured in India at
the rates set forth in the schedule to the Central excise Tariff
Act,1985.
it is therefore clear that as soon as the goods in question are
produced or manufactured, they will be liable to payment of
Excise duty.
However for convenience duty is collected at the time of
removal of the goods. While Section 3 of the Central Excises
and salt Act,1944 lays down the taxable event, Rules 9 and 49
of the Central excise Rules,1944 provides for the collection of
duty.

There are three types of Central Excise duties collected in India

namely:
Basic Excise Duty
This is the duty charged under section 3 of the Central
Excises and Salt Act,1944 on all excisable goods other than
salt which are produced or manufactured in India at the rates
set forth in the schedule to the Central Excise tariff Act,1985.
Additional Duty of Excise
Section 3 of the Additional duties of Excise (goods of special
importance) Act,1957 authorises the levy and collection in
respect of the goods described in the Schedule to this Act.
This is levied in lieu of sales Tax and shared between Central
and State Governments. These are levied under different
enactment's like medicinal and toilet preparations, sugar etc.
and other industries development etc.

Special Excise Duty

As per the Section 37 of the Finance

Act,1978 Special excise Duty was attracted on
all excisable goods on which there is a levy of
Basic excise Duty under the Central Excises
and Salt Act,1944.Since then each year the
relevant provisions of the Finance Act
specifies that the Special Excise Duty shall be
or shall not be levied and collected during the
relevant financial year.

Custom Duties
The Customs Act was formulated in 1962 to prevent illegal imports

and exports of goods. Besides, all imports are sought to be subject

to a duty with a view to affording protection to indigenous
industries as well as to keep the imports to the minimum in the
interests of securing the exchange rate of Indian currency.
Duties of customs are levied on goods imported or exported from
India at the rate specified under the customs Tariff Act, 1975 as
amended from time to time or any other law for the time being in
force.
In order to give a broad guide as to classification of goods for the
purpose of duty liability, the central Board of Excises Customs
(CBEC) bring out periodically a book called the "Indian Customs
Tariff Guide" which contains various tariff rulings issued by the
CBEC.

Types of custom
duties
Basic Duty:

This is the basic duty levied under the Customs Act. The rate varies for
different items from 5% to 40%.
Additional Duty (Countervailing Duty) (CVD):
This additional duty is levied under section 3 (1) of the Custom Tariff Act and
is equal to excise duty levied on a like product manufactured or produced in
India.
If a like product is not manufactured or produced in India, the excise duty that
would be leviable on that product had it been manufactured or produced in
India is the duty payable.
Additional Duty to compensate duty on inputs used by Indian manufacturers.
This Additional Duty is levied under section 3(3) of the Customs Act. It can be
charged on all goods by the central government to counter balance excise
duty leviable to raw materials, components and other inputs similar to those
used in the production of such good.

Types of custom duties

Anti-dumping Duty:
Sometimes, foreign sellers abroad may export into India goods
at prices below the amounts charged by them in their
domestic markets in order to capture Indian markets to the
detriment of Indian industry. This is known as dumping.
In order to prevent dumping, the Central Government may
levy additional duty equal to the margin of dumping on such
articles, if the goods have been sold at less than normal value.
Dumping duty can be imposed even when goods are imported
indirectly or after changing the condition of goods.
Dumping duty can be levied on imports on such countries only
if the Central Government proves that import of such goods in
India at such low prices causes material injury to Indian
industry.

Types of custom duties

Protective Duty:
If the Tariff Commission set up by law recommends that in order
to protect the interests of Indian industry, the Central Government
may levy protective anti-dumping duties at the rate
recommended on specified goods.
The notification for levy of such duties must be introduced in the
Parliament in the next session by way of a bill or in the same
session if Parliament is in session.
If the bill is not passed within six months of introduction in
Parliament, the notification ceases to have force but the action
already undertaken under the notification remains valid.
Such duty will be payable up to the date specified in the
notification.
Protective duty may be cancelled or varied by notification. Such
notification must also be placed before Parliament for approval as
above.

Duty on Bounty Fed Articles:

In case a foreign country subsidies its exporters for exporting goods to
India, the Central Government may import additional import duty equal
to the amount of such subsidy or bounty.
If the amount of subsidy or bounty cannot be clearly deter mined
immediately, additional duty may be collected on a provisional basis and
after final determination, difference may be collected or refunded, as the
case may be.
Export Duty:
Such

duty is levied on export of goods. At present very few articles such

as skins and leather are subject to export duty. The main purpose of this
duty is to restrict exports of certain goods.
The Central Government has been granted emergency powers to
increase import or export duties if the need so arises. Such increase in
duty must be by way of notification which is to be placed in the
Parliament within the session and if it is not in session, it should be
placed within seven days when the next session starts. Notification
should be approved within 15 days.

What do you mean by customs duty & excise duty?

Customs duty is levied on goods imported in India. It is levied on Ports. If

goods are imported by illegal means and CD is not paid then these
goods are called smuggled goods and liable for prosecution.
Only permitted goods can be imported into the country. There are
restrictions on quantity and value also so that foreign countries should
not dump their cheaper goods here and create unhealthy competition to
local manufacturers.
Excise duty is levied on goods manufactured in India. It is levied when

the goods are ready to go out of the factory.

Mod vat is available in case of excisable goods that is to say excise paid on

inputs is being given credit of before paying excise duty.

There are concessions given to small scale industrialist (SSI) and medium
scale industrialists and normally the SSI (turnover below 3 crores I guess or
may be some other criteria are there) need not pay any excise duty
(accordingly they do not get modvat credit also)..

Thank You