TYPES OF TAXES IN INDIA

DIRECT TAXES
Income tax
Wealth tax
Property tax etc.

INDIRECT TAXES
Sales tax
Vat
Excise duty
Custom duty etc.
IN ACCORDANCE WITH THE CONSTITUTION
OF INDIAN GOVERNMENT
THE MAIN TAXES/DUTIES THAT THE UNION
GOVERNMENT IS EMPOWERED TO LEVY
 INCOME TAX (except tax on agricultural income, which
the State Governments can levy),

 VAT (value added taxes)

 Central Excise and Sales Tax (CST)

 Service Tax (tax levied on service provided )

PRINCIPAL TAX LEVIED BY THE
STATE GOVERNMENT
 Sales Tax

 Stamp Duty

 State Excise

 Land Revenue

 Octroi
LOCAL BODIES EMPOWRED LEVY TAXES ON

Property

Expenditure

User charges
Procedure of payment of taxes
Types of Payment Rate
Interest
Royalties*
Technical service fee* 10%


What is Service tax?

 Service tax is an indirect tax
levied under the Finance Act,
1994, as amended from time to
time, on specified services. At
present, there are approximately
96 categories (including 15 new
services introduced by Budget 2006)
of net services taxable under the
service tax.
WHO IS AUTHORIZISE TO
ADMINISTER SERVICE TAX

WHO IS LIABLE TO DEPOSITE SERVICE TAX

WHAT IS THE CONSEQUENCE OF DELAY OF DEPOSITE
OF SERVICE TAX
NEW SERVICES THAT HAVE BEEN BROUGHT UNDER THIS TAX NET IN BUDGET 2006-07

 Include services provided by share transfer agents and registrar to

issues

 recovery agents, maintenance and management of Automatic Teller

Machines

 sale of advertising space or time (except for print media)

 sponsorship of events by companies (except for sports)

 public relations management services, ship management services,

international air travel (excluding economy class)
CONTINUED…..
 rail container handling services (excluding haulage charges),
cruise ship travel, Internet telephony services

 business support services, auctioneers’ service (excluding auction

of property under directions or orders of a court of law or auction
by the government)

 and credit card, debit card and other payment card-related

services.
 WHAT IS EXCISE
DUTY

-Excise duty is an
indirect tax levied
and collected on
goods
manufactures in
India .
  WHO IS RESPONSIBLE TO PAY EXCISE
DUTY TO THE GOVERNMENT

• ON WHICH GOODS EXCISE DUTY IS

CHARGED

• HOW AND WHEN EXCISE DUTY IS PAID

HOW EXCISE DUTY IS DIFFERENT
FROM OTHER TAX

HOW EXCISE DUTY IS

CALULATED
CHANGES/AMENDMENTS HAVE BEEN MADE VIDE
BUDGET 2006.
 Exemption from payment excise duty on manufacture of
computer has been withdrawn &with effect from March
1,2006,excise duty on of 12% has been impose on manufacture
of computers.

 Excise duty impose on package software, also know as canned

software is about 8%

 Excise duty on storage device i.e. DVD driver .USB flash

memory has been reduce from 16% to Nil

 Excise duty on MP3 Player & MPEG4 player reduced from 16%
to 8%
 Custom Duty Is A Tax Which A State Collects
On Goods Imported Or Exported Out Of The
Boundaries Of The Country

 In India, Custom Duties Are Levied On The

Goods And At The Rates Specified In The
Schedules To The Custom Tariff Act, 1975
OBJECTIVES OF CUSTOM DUTIES
 Restricting Imports For Conserving Foreign
Exchange
 Protecting Indian Industry From Undue
Competition
 Regulating Exports
 Prohibiting Imports And Exports Of Goods
For Achieving The Policy Objectives Of The
Government
 Co-ordinating Legal Provisions With Other
Laws Dealing With Foreign Exchange
CUSTOM DUTY IS LEVIED ON
 IMPORT OF GOODS

 EXPORT OF GOODS
RULES
 Custom Valuation Rules,1988 For Valuation
Of Imported Goods That Calculates The
Custom Duty Payable

 Custom And Central Excise Duties Drawback

Rule,1971 For Calculating Rates Of Duties As
Drawbacks On Exports
REGULATIONS
 The Central Board Of Excise And Customs
Has Been Empowered To Make Regulations
To Carry Out The Provisions Of The Act

 In Order To Maintain The Rules Of The Act

Several Regulations Like Customs House
Agnents Licensing Regulations, 1984 Have
Been Framed.
NOTIFICATIONS
 The Central Government May Also Issue
Notifications In The Official Gazette For The
Purpose Of The Act.
 The Notification Is Not Considered To Be
Valid If It Is Not Approved Within A Span
Time Of Fifteen Days.
TYPES OF CUSTOM DUTIES
 Basic duty

 Addition duty

 Anti-dumping duty

 Export duty

 Protective duty
 WHAT IS INSTANT ONLINE CUSTOM
DUTY
 Instant Online Custom Duty Is An Product
For Online Payment Of Taxes And Expenses
Developed Jointly By Bank Of China And The
Custom.
ADVANTAGES AND CHARACTERISTICS OF ONLINE
INSTANT CUSTOM DUTY

 Online Payment Of Taxes And Expenses Is A

Supplementary Service Of China Electronic Port.

 The Enterprises Can Apply To Go Through Relevant

Import And Export Procedures With Government
Agencies

 The first bank that cooperate with the custom on

development of products for online payment of taxes
and expenses in china, bank of china has rich
experience in development, operation and service
maintenance of the products.
TYPES OF TAXES AND EXPENSES PAID INSTANT
ONLINE CUSTOM DUTY

 Import/Export Custom Duty

 Anti-dumping Tax And Other Special Custom

Duties

 Import Value-added Tax

 Import Consumption Tax

 BUSINESS PROCESS OF INSTANT ONLINE CUSTOM
DUTY OPERATING PROCESS

Open an account
At bank of china
Apply for online Customs electronic tariff
payment service Imposition notice
Become port user

Enterprise online
payment

Bank withholding
Custom examination
Tariff is transferred to And clearance
Treasury or customsBank checks tariff
Bank deduction
succeeds
WHAT IS SALES TAX?

 Sales tax is a tax on

the supply of goods
and certain services ,it
is charged at the time
of sale and then
deposited in the
Government treasury.
WHAT TYPES OF BUSINESS ARE
NOT LIABLE FOR SALES TAX?
 Agricultural Products
 Most Of Pharmaceutical Products
 Educational & Scientific Materials
 Equipment For Fighting AIDS & CANCER
HOW DOES SALES TAX
OPERATE?
Output tax

Input tax
HOW SALES TAX REGISTERED

WHEN IS SALES TAX PAYABLE?

OBJECTS OF SALES TAX
 To formulate principles for determining

 To provide for levy, collection and distribution

of taxes

 To declare certain goods

BASIC SCHEME OF THE CST ACT
 Sales Tax Revenue To States
 Tax Collected In The Sated Where Movement Of
Goods Commences
 Tax On Inter State Sale Of Goods
 State Sales Tax Law Applicable In Many Aspects
 CST Act Defines Some Concepts
 Declared Goods
INTER-STATE AND INTRA-STATE
SALE
WHAT IS INTERSTATE SALE
According To S3, A Sale Or Purchase Shall Be Deemed
To Take Place In The Course Of Interstate Trade Or
Commerce In The Following Cases:

 When The Sale Or Purchase Occasions The

Movement Of Goods From One State To
Another
 When The Sale Is Effected By A Transfer Of
Documents Of Title To The Goods During Their
Movement From One State To Another
MAIN PRINCIPLES IN STATES SALES TAX LAWS

 Existing Goods Or Future Goods

 In Most Of The Cases Related To The Sales
Tax
 Under The Provisions Of Same State Laws
 A Quarter Return Of Sales Or Purchases
 Concerned Sales Tax/Commercial Tax Officer
 Apply For Registration And Obtain A
Registration
INTRODUCTION OF VAT
WHAT IS VAT?
 Vat Means Value
Added Tax
 Vat Paid By Dealers
On Their Purchases
Is Usually Available
For Set-off Against
The Vat Collected
On Sales.
IS VAT YET ANOTHER TAX

It Will Replace The Following Four

Existing Taxes:
 The Bombay Sales Tax Act, 1959
 The Maharashtra Sales Tax On The
Transfer Of Right To Use Any Goods
 Bombay Sales Of Motor Spirit Taxation
Act,1958
WHY CHANGE TO VAT

 Vat Is A Modern And Progressive

Tax System Now Used In Over 130
Other Countries.
WHAT ARE THE BENEFIT OF VAT
 It Is Simple, Transparent And Progressive
 Business Friendly System Of Taxation
 Reduction In The Number Of Tax Rates To
Only Two Main Rates – 4% And 12.5%
 Reduction In The Effective Tax Rate For
Many Goods
 Elimination Of “Tax On Tax” Existing In The
Sales Tax System
 Simplification Of Tax Forms And Procedures
WHAT TYPES OF BUSINESS ARE LIABLE FOR VAT?

VAT APPLIES TO ALL TYPES OF BUSINESS

INCLUDING:
 Importers
 Manufacturers
 Distributors
 Wholesalers
 Retailers
 Works Contractors
 Lessors
HOW IS VAT CHARGED?
 Vat Is Not A Cost To The Dealers

 Vat As A Separate Amount On A Bill Or Cash

Memorandum
WHAT ARE THE OBLIGATIONS OF
DEALERS REGISTERED FOR VAT?

Dealers Who Are Required To Be

Registered For Vat Must:
 Change And Collect Vat On Their Sales Of
Taxable Goods
 Issue Proper Tax Invoices
 Keep Proper Records And Books Of Account
 Calculate The Vat To Government Based On Vat
 File Vat Returns On A Regular Basis Declaring
Their Vat Liability
WHAT IS RATE OF VAT?

Under The Vat, The Tax Rates Have Been

Simplified:
 4% For Items Consisting Mainly Of Raw

Materials Used In The Manufacturing Process

 12.5% For All Goods Unless They Are Listed

Under The Other Rates.

 Foodgrains Including Pulses, Milk, Vegetables

Books are Not Subject To Vat.

Raw Material Sale Price Rs. 1,000
Producer Vat Rs. 100 Manufacturer

Sales Price Rs.1,500 Total Vat Rs.150

Vat Payable
150-100=50

Consumer
Wholesaler

Sales Price Rs.1,800 Sales Price Rs. 2,000

Total Vat Rs.180 Total Vat Rs.200
Vat Payable Retailer Vat Payable
180-150=30 200-180=20
DEFINITION OF INCOME TAX
 “An income tax is tax
levied on financial
income of person co-
operation or other
legal entity.”
HISTORY
PRINCIPLES
 Personal Earnings
 Capital Gains
 Business Income
 Rates For Different Types Of Income May Vary
And Some May Not Be Taxed At All.
 Capital Gains May Be Taxed When Realized
 Business Income May Only Be Taxed If It Is
Significant
 Personal Earnings May Be Strictly Defined
 Tax Rates May Be Progressive, Regressive,or Flat
 A Progressive Tax Taxes Differentially Based On
How Much Has Been Earned
 Personal Income Tax Is Often Collected On A Pay-
as-you-earn Basis
CRITIQUE OF INCOME TAX
 Extremely Complex
 Requiring Detailed Record-keeping
 Lengthy Instructions
 Complicated Schedules
 Worksheets And Dorms
 It Can Penalize Word
 Discourage Saving And Investment
 Not Border-adjustable
CHARGE OF INCOME TAX
 Section 4 Of The Act States That-
 Income Tax Shall Be Charged
 At The Rates Laid Down By The Finance Act
 For That Assessment Year
 In Accordance With Subject To The Provisions Of
This Act
 In Respect Of The Total Income
 Of The Previous Year
 Of Every Person
COMPUTATION OF INCOME AND TAX
Determine Scope Of Total Income
Residence
Year
Place
Exclude Exempt Income
Classify Income Under Different Heads
Compute Income Under Each Head
Determine Gross Total Income
Deduct Claims For Deductions
Compute Net Taxable Income NIT= GTI-DA

Compute Net Tax INCOME TAX =NET (IT)*(Rate of tax)

 INCOME TAX
INCOME TAX
When Computed?
Assessment Year
How Computed?
Assessment

What Is Income At What Rate?

(Rate Laid Down In Annual
Finance
Act I.E Budget

Whose Income
Income Of Every Person
Payable By Whom?
Payable By Assessee
Income Of What Period
Income Of “Previous Year”

Income How Computed?

Income Computed According To
Provisions Of Income Tax Act
PERSONAL TAX RATES
For Individuals, Huf, Association Of Persons (Aop) And Body Of
Individuals (Boi):

For the Assessment Year 2007-08

Taxable Income Slab (Rs.) Rate (%)

Up To 1,10,000
Up To 1,45,000 (For Women) Nil
Up To 1,95,000 (For Resident Individual Of 65 Years Or Above)
1,10,000 – 1,50,000 10
1,50,001 – 2,50,000 20
2,50,001 – 1,000,000 30
1,000,001 Upwards 30*
Tax Rates for NRI
Name Of Income Rate*
Dividend** 20%
Interest Received On Loans Made In 20%
Foreign Currency To An Indian
Concern Or Government Of India.
Income Received In Respect Of Units 20%
Purchased In Foreign Currency
For Agreements Entered
Into:
Royalty Fees Or Technical Fees After 31.05.97 But
Before 01.06.05 - @ 20%
After 01.06.05 - @ 10%
Interest On FCCB 10%
FRINGE BENEFIT TAX
Taxable
Fringe Benefit Effective Tax Rate
Percentage
Medical Reimbursements 20% 6.8%

Telephone Bills 20% 6.8%

Employee Stock Options

(Difference Between Market
100% 33.99%
Value And Purchase Price On
Vesting Date)
INCOME TAX RATES ACROSS THE WORLD

Personal Income Tax Rate

Country
Australia 0% - 48.5%
Canada 16% - 29%
Estonia 24% - 24%
Denmark 44% - 63%
Hong Kong 0% - 33%
India 0% - 33%
Israel 10% - 49%
Malaysia 0% - 29%
Mexico 3% - 32%
Russia 13% - 13%
Singapore 0% - 22%
Uk 0% - 40%
Us 10% -35%
CORPORATE INCOME TAX

Income Tax Deduction

Income Tax Sections

Section10(30)
Section88b
Section88c
INDIVIDUAL INCOME TAX

Income Tax On Salary

Income Tax On House
Property
Income Tax On Pension
Income Tax On Capital
Gains
Income Tax Upon Income
From Business Or
Professions