Various direct tax and their definitions

In this article we are going to discuss various direct tax that are levied in an economy.
A) Income Tax:
Definition: Income tax is tax levied on income received by individuals and corporations. It is a direct tax, as it is levied on personal income (for individuals) or profit (in case of corporation) by directly imposing on subject (Taxpayer).
In India Union or Central government has been authorized to levy income tax by constitution of India as it is part of union list. Under this authorization, Indian Parliament has passed many laws to broadly define it’s power & reach, with finance act (Budget) every year specifying details on tax regime.

Indian IT Act broadly categorizes 5 type of income for which Income Tax returns are filed:
1) Salaries
2) Profit (The residual money left with entrepreneur)
3) Capital Gains
4) Rental income
5) Other remaining source

B) Capital Gains Tax:  This topic has been separately covered. Click here.

C) Corporate Tax:
Definition: Corporate tax is paid by owner of business (annually) on the profit or net income of the company. It is also known as company tax.  After taking out all expenses  of business, Residual payment left with the owner is charged corporate tax.
In India, under companies act 1956 both public and private companies are liable to pay this tax.

D) Securities Transaction Tax (STT):
Tax charged on transaction whenever someone sell or purchase shares, bonds, debentures (barring commodities) from the stock broker. It’s aim is to discourage the extensive buying and purchasing which create speculations in market. In addition the tax money is also used in expenditures by Govt.

E) Commodities Transaction Tax (CTT):
Tax charged on transactions constituting selling and purchasing commodities derivatives. It’s purpose is same as of STT except being charged on commodities derivatives rather than companies shares.

F) Wealth Tax:
Tax paid by individuals and companies on the value of total assets they hold. It is a tax on the stock of wealth of an assessee (whereas income tax is on flow of assests). A particular asset which fulfill all conditions to be regarded as an asset under Wealth Tax act, is considered as wealth of the assessee, hence liable to be taxed.
Cooperative society, political party does not fit under definition of Wealth tax assessee, while money in mutual fund is also exempted from its sphere. In India Wealth Tax was abolished in 2015, with govt asking assessee to pay more surcharge if income exceeds 1 crore.

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