TAXATION IN INDIA
Ms.K.Sindhuja
Assistant Professor, SIMS

 “THE HARDEST THING IN THE WORLD IS TO UNDERSTAND THE INCOME TAX”-ALBERT EINSTEIN”

A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures.

TAXES ARE ALSO USUALLY SPLIT INTO 3 GROUPS:

• Flat taxes: Everybody pays the same percentage. For example, Russia has a flat income tax and everybody in Russia has to pay 13% of the income.
• Progressive taxes: The more money a person makes the higher percentage of tax they have to pay. Most countries have progressive income taxes.
• Regressive taxes: Under this system of taxation, there is an inverse relationship between the tax rate and taxable income. The rate of taxation decreases as the income of taxpayers increases.. Sales taxes are usually called regressive as poor people spend a higher percentage of their money, than rich people.

KEY TAX INITIATIVES IN INDIA:

Export Promotion:

• Applicability: SEZ units operational before 1st April 2020

Incentive: Deduction of 100% of profits and gains derived from the export business for the first 5 years of commencement, 50% of profits and gains derived from the export business for the next 5 years, 50% of plowed-back profits and gains from the export business for next 5 years.

Research & Development:

• Applicability: Companies in respect of any expenditure on R&D in an approved in-house facility
• Incentive: Weighted tax deduction of 200% granted to companies Validity: 31st March 2020

Investment-linked

• Incentive: To incentivize investment in certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred.

Start-up India Scheme:

• Incentive: Tax incentives granted to eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) with respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate.

International Financial Services Centre:

• Applicability: Caters to customers outside the jurisdiction of the domestic economy. Such centers deal with flows of finance, financial products, and services across borders.
• Incentives: Tax concessions on capital gains, Minimum Alternate Tax, and Dividend Distribution Tax

Though the taxation has come with a new look Covid-19 has complicated India’s economic slowdown throwing new challenges for both the government and citizens. Cash strapped government has increases taxes on petrol and liquor. People face an uncertain job future.

“You don’t pay taxes-they take taxes”-Chris Rock