- Tuesday, April 16, 2024
By: Admin Super
For any country to have a sustainable economic and social growth, it needs financial support. The taxation system of India aims to fulfil these requirements. Every earning citizen of India pays taxes to help meet the public expenses. These taxes can be of two types:
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Let’s look at how the direct taxes in India work and how you can leverage specific tax saving tips to minimize your tax liability.:
Direct Taxes in India
Direct Taxes in India are a common types of taxes, which are paid directly by an organization or an individual to the tax authorities of the government. The burden of the tax cannot be transferred to another entity, unlike indirect taxes. It is essential to understand the various types of direct taxes in India. As a tax-paying individual, you must be aware of where your hard-earned money goes.
Types of Direct Taxes
Income Tax is probably the most well-known type of direct taxes in India. There are various tax brackets to prescribe the amount of tax to be paid according to the annual income of a person. Every earning individual is liable to pay income tax depending on their tax bracket. In the case of salaried individuals, advance income tax is deducted in the form of TDS (tax deducted at source).
There are also several tax saving investment options listed in the Income Tax Act, 1961. Financial tax saving investment options such as insurance policies, provident funds, and home loans are eligible for a tax exemption. An individual has to file an annual income tax return with the Income Tax Department of India. One of the helpful tax saving tips here is that you must look to personalize your investment portfolio to suit your long-term financial goals and requirements.
Corporate tax is levied on the domestic as well as foreign organizations in India. It is a tax payable on the net profit of the firms. International corporations that earn profit through their operations in India are also liable to pay it under the direct taxes in India.
There are other types of corporate taxes, such as:
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It is a form of direct taxes in India that applies to the income earned due to the sale of investments or assets. An individual’s capital assets can be anything like a car, house, bonds, shares, art, farms that hold financial value.
Benefits Of Direct Tax
There are certain benefits associated with direct taxes in India. Here are a few of them listed in detail:
Since the direct taxes in India can be collected at the source, it helps save on the administrative cost involved otherwise. For example, when the income tax is deducted from an employee’s salary, the employer is the tax collector. It reduces the financial burden substantially. It is also a time-saving process.
When it comes to direct taxes in India, there is no uncertainty on either side. Taxpayers are aware of the amount which they will pay as tax, and the government can calculate the revenue accordingly. The certainty is also helpful in detecting corruption and fraud in tax collection.
The tax rates are decided according to the annual income of an individual. The system of slab rates ensures that every individual is taxed on a fair scale. It promotes equality and justice among the taxpaying citizens of the country.
Direct taxes in India can be used as a tool to curb inflation. The government may increase the tax rate in case of inflation to reduce the demands of particular goods and services. Consequently, inflation is controlled due to a decrease in demand.
Be an Ideal Citizen, Pay Your Taxes on Time
It can often be a challenge for taxpayers to manage expenses while paying taxes. To deal with this issue, the income tax system offers multiple tax saving investment options and tax saving tips. Depending on the types of investment by an individual, they can maximize their tax saving every year. It will enable the dual benefit of a valuable financial investment, such as an insurance policy as well as the tax saving advantage.
Tax saving investment options such as life insurance from reputable insurers such as Max Life Insurance give you the desired cover as well as act as an investment for tax exemption. Thus, you can secure your family’s financial future while diversifying your portfolio to earn earning significant tax savings.
