News Highlight
India’s net direct tax collection till October 8 in the financial year 2022-23 has risen to ₹7.45 lakh crore.
Key Takeaway
- This direct tax collection is more than half of the Budget targets.
- It is an increase of 16.3% over the tax inflows during the corresponding period a year ago.
What is Direct tax
- It is a tax that a person or organisation pays directly to the entity that imposed it.
- An individual taxpayer, for example, pays direct taxes to the government for various purposes, including income tax, real property tax, personal property tax, or taxes on assets.
Major types of direct tax
- Income Tax:
- An income tax is a tax imposed on individuals or entities in respect of their income or profits.
- Individuals, Hindu undivided families, unregistered businesses, and other groups of persons are all subject to income tax.
- The nature of income tax in India is progressive.
- Corporation Tax:
- It is a tax placed on the profits of corporations and business firms. It is also called Corporate tax.
- As of January 2022, the COrporation tax is 22 per cent for all domestic companies.
- Capital Gain Tax:
- A capital gain is any profit or revenues derived from the sale of a capital asset.
- Land, buildings, houses, jewellery, patents, and copyrights are examples of capital assets.
- Dividend Distribution Tax:
- A dividend refers to the distribution of profits to shareholders of a company.
- Thus, the dividend distribution tax is a type of tax payable on the corporation’s dividends offered to its shareholders.
Advantages of Direct Tax
- Equity:
- Direct taxes, like income tax, wealth tax, etc., are based on the principle of ability to pay, so the equity or justice in allocating the tax burden is well secured by these taxes.
- Gives Certainty:
- The direct tax provides both the government and the taxpayers with a sense of certainty because the amount of tax that must be paid and collected is known to both the taxpayer and the government.
- Progressive:
- Since direct taxes can be designed with fine gradation and progressiveness, they can serve as an essential fiscal weapon for reducing the gap of inequalities in income and wealth.
- Direct taxes thus lead to the objective of social equality.
- Addresses inflation issues:
- During periods of high inflation, the government raises taxes to limit the demand for goods and services, resulting in a fall in inflation.
- Makes Government Accountable:
- Individuals are aware of the need to pay taxes. As a result, they are aware of their rights and are engaged in the government’s use of taxes. This ensures that the government is held accountable.
Government Initiatives to Improve Direct Taxes
- Vivad se Vishwas Scheme:
- Under Vivad se Vishwas, declarations for settling pending tax disputes are currently being filed.
- This will benefit the Government by generating timely revenue and bringing down mounting litigation costs to the taxpayers.
- ‘Transparent Taxation – Honoring The Honest’ platform:
- It is aimed at bringing transparency in income tax systems and empowering taxpayers.
Content Source: The Hindu