TAXES
Taxation : Government has many sources of getting money from the people in the form of taxes, custom duty, taxes on wines, sales tax, house tax, wealth tax, gift tax etc. Various types of taxes are as follows :
DIFFERENT TAXES
Direct Taxes : Taxes like income tax, wealth tax, gift tax etc. which are imposed on individuals or group of people directly are known as direct taxes.
Indirect taxes : Sales tax, central excise etc. are the taxes which indirectly affect the people are known as indirect taxes.
Income tax : Every one whose total income exceeds a specified limit is required to pay a part of his income as tax to the government. This is known as income tax and is levied annually. The person paying the income tax is called an assessee or income tax payer. Now-a-days most of the people have a permanent income tax account num- ber issued by income tax department.
DEDUCTIONS
- Standard Deductions : All salaried employees are entitled to a standard The amount of standard deduction changes every year.
- Profession Tax : This deduction from the Gross Income is on account of the assessee paying ‘Employment Tax’. It is paid to the State
- House Rent Allowance (HRA) : It is an allowance paid by the employer to his employee to meet actual expenditure on rent in respect of residential accommodation, maximum HRA allowed in Mumbai is 50% of salary and 40% in Delhi, Kolkata and Chennai
- Deductions under section 80 G : Deduction is available for donation to certain funds :
- 100% deduction is given to donations to Prime Minister’s National Relief Fund, Chief Minister’s Relief Fund
- 50% of the sum paid to certain Institutions or Funds is allowed to be deducted from the income as per Income Tax Act 1961, or 10% of gross income whichever is
5. Rebate under section 88 :
- Some rebate is allowed on the following savings. The rebate amount changes every
- Provident Fund
- Public Provident Fund
- Subscription to National Saving Schemes.
- Life Insurance Premium
- 6-Year National Saving Certificates
- Unit-Linked Insurance Plan 1971
- Some Mutual Funds or Saving Specified by the
- 25% rebate is allowed to authors, sportsmen, artists, musicians, actors, playwrights and so
Computation of income tax : The income tax may be computed as under :
- Calculate total gross
- Subtract standard deductions from income. The balance so obtained is the taxable
- The total tax payable on all total income is to be calculated using the table of income tax rates gives every
- From the amount of the total income tax so obtained, subtract the given
percentage of the savings made under section 88, subject to a maximum specified limit of money.
- Balance tax is net tax payable by the assessee to the Income Tax
Sales tax : On the purchase of some articles or commodities the purchaser has to pay a certain amount of tax at specified rate. This is called sales tax. It is calculated on selling price of goods. The sales tax is different in different states.
Rules for property tax, wealth tax etc. are different in each state
