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Monday, November 9, 2020

Tax System Indian Economy

Tax System - Indian Economy

  •  A compulsory contribution given by a citizen or organization to the Governments is called Tax, which is used for meeting expenses on welfare work.

  • The distribution of tax between Centre & State has been clearly mentioned in the provisions of the Indian Constitution (Centre-State Financial Relations, Article 264 - 293)
  • For rationalizing it from time to time, the Finance Commission (Article 280) has been constituted.
Tax System has been divided into two parts:

There are two types of taxes:

Direct Tax

  • The taxes levied by the central government on incomes and wealth are important to direct taxes.
  • The important taxes levied on incomes are- 1.) Income Tax, 2.) Corporation Tax.
  • Taxes levied on wealth are- wealth tax, gift tax, property tax, etc.

Indirect Tax:
  • Indirect tax is not paid by someone to the authorities and it is actually passed on to the other in the form of increased cost.
  • They are levied on goods & services produced or purchased.
  • The important taxes levied are- Excise Tax, Sales Tax, Vat, Entertainment Tax, etc.
  • The main forms of Indirect Taxes are customs & excise duties and sales tax.
Taxes imposed by the Central Government- 
  • Income Tax, Corporate Tax, Property Tax, Succession Tax, Wealth Tax, Gift Tax, Customs Duty, Tax on Agricultural wealth, etc.
Taxes imposed by the State Government-
  • Land revenue tax, Sales tax, Agricultural income tax, Agricultural land revenue, State excise duty, Registration fee, Entertainment tax, Stamp duty, Road tax, Motor vehicle tax, etc.

Important Taxes Imposed in India:

  • Tax on Income & Wealth: The central government imposes different types of tax on income & wealth, i.e., income tax, corporate tax, wealth tax, gift tax. Out of the income tax & corporate tax are more important from the revenue point of view.
  • Personal Income Tax: It is imposed on an individual, combined with Hindu families & total income of people of any other communities. In addition to tax, separate surcharges have also been imposed on some items.
  • Income from Agriculture in India is free from Income Tax.
  • Corporate Tax: It is imposed on Registered Companies & Corporations. The rate of corporate tax on all companies is equal. However, various types of rebates (discounts) and exemptions have been provided.
  • Custom Duties: As per the Constitutional provisions, the central government imposes import duty & export duty both. Import & Export duties are not the only provenances (source) of income but with the help of it, the central government regulates the foreign trade.
  • Import Duties: Import duties are ad-Valorem in India. It is imposed on the taxable item on a percentage (%) basis.
  • Export Duties: It is more important, compared to Import duties in terms of revenue & regulation of foreign trade.
  • Excise Duties: This is commodity tax as it is imposed on the production of an item & it has no relevance with its sale. This is the largest pedigree of revenue for the Central Government. 
  • Except for liquor, opium & other drugs, the production of all the other items is taxable under Central Excise Duties.





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