Taxation in India
Taxes in India are levied by the Central Government and the state governments. Some minor taxes are also levied by the local authorities such the Municipality or the Local Council.
The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Centre and the State. An important restriction on this power is Article 265 of the Constitution which states that "No tax shall be levied or collected except by the authority of law." Therefore each tax levied or collected has to be backed by an accompanying law, passed either by the Parliament or the State Legislature. In 2010-11, the gross tax collection amounted to 7.92 trillion, with direct tax and indirect tax contributing 56% and 44% respectively.
Income Tax Department functions under the Department of Revenue in Ministry of Finance. It is responsible for administering following direct taxation acts passed by Parliament of India.
Income Tax Act
Wealth Tax Act
Gift Tax Act
Expenditure Tax Act
Interest Tax Act
Various Finance Acts (Passed Every Year in Budget Session)
Income Tax Department is also responsible for enforcing Double Taxation Avoidance Agreements and deals with various aspects of international taxation such as Transfer Pricing. Finance Bill 2012 seeks to grant Income Tax Department powers to combat aggressive Tax avoidance by enforcing General Anti Avoidance Rules.
Organisational Structure of the Central Board of Direct Taxes: The CBDT is headed by Chairman and also comprises six members, all of whom are Special Secretary to Government of India.
Member (Income Tax)
Member (Legislation and Computerisation)
Member (Personnel & Vigilance)
Member (Audit & Judicial)
The Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service of India, whose members constitute the top management of Income Tax Department.
Income Tax Act of 1961
The major tax enactment in India is the Income Tax Act of 1961 passed by the Parliament, which imposes a tax on income of individuals and corporations. This Act imposes a tax on income under the following five heads:
Income from house and property,
Income from business and profession,
Income from salaries,
Income in the form of Capital gains, and
Income from other sources
Income tax rates
In terms of the Income Tax Act, 1961, a tax on income is levied on individuals, corporations and body of persons. The rate of taxes are prescribed every year by the Parliament in the Finance Act, popularly called the Budget. In terms of the Finance Act, 2009, the rate of tax for individuals, HUF, Association of Persons (AOP) and Body of individuals (BOI) is as under;
Service tax is a part of Central Excise in India. It is a tax levied on services provided in India, except the State of Jammu and Kashmir. The responsibility of collecting the tax lies with the Central Board of Excise and Customs(CBEC).
The ex-Finance Minister of India, Pranab Mukherjee in his Budget speech has indicated the government's intent of merging all taxes like Service Tax, Excise and VAT into a common Goods and Service Tax by the year 2011. To achieve this objective, the rate of Central Excise and Service Tax will be progressively altered and brought to a common rate. In budget presented for 2008-2009 It was announced that all Small service providers whose turnover does not exceed 1,000,000 need not pay service tax.
Wealth Tax Act, which has a regular history of being passed and repealed;
Service Tax, imposed under Finance Act, 1994, which taxes the provision of services provided by service providers within India or services imported by Indian from outside India;
Central Excise Act, 1944, which imposes a duty of excise on goods manufactured or produced in India;
Customs Act, 1962, which imposes duties of customs, counterveiling duties and anti-dumping duties on goods imported in India;
Central Sales Tax, 1956, which imposes sales tax on goods sold in inter-state trade or commerce in Indisale of property situated within the State;
Now, Service Tax and Excise will be inclusive part of GST in due course of time.