1. Types of Taxes in India

• Direct Taxes: These are taxes that are directly levied on the income or wealth of individuals and entities.
  • Income Tax: Levied on the income of individuals, Hindu Undivided Families (HUF), companies, firms, LLPs, and others.
  • Corporate Tax: Levied on the profits of domestic and foreign companies operating in India.
  • Wealth Tax (abolished in 2015): Previously imposed on the net wealth of individuals and entities.
• Indirect Taxes: Taxes levied on goods and services. After the implementation of the Goods and Services Tax (GST), most indirect taxes were subsumed into it.
  • Goods and Services Tax (GST): A unified tax on the supply of goods and services across India, implemented on July 1, 2017. It replaced VAT, service tax, excise duty, and other indirect taxes.
  • Customs Duty: Levied on goods imported into the country.
  • Excise Duty (replaced by GST): Previously levied on the manufacture of goods.

2. Income Tax Act, 1961

The Income Tax Act, 1961, governs the taxation of income in India. It provides for the computation of taxable income, tax rates, exemptions, deductions, and filing requirements.

• Residential Status and Taxability: Taxation depends on whether an individual is a resident, non-resident, or resident but not ordinarily resident (RNOR) in India.

• Taxable Income: Broadly divided into five heads:

  1. Income from Salary
  2. Income from House Property
  3. Profits and Gains from Business or Profession
  4. Capital Gains
  5. Income from Other Sources

• Deductions under Chapter VI-A: Deductions are available under various sections like:

  • Section 80C: Deductions for investments in specified schemes like PPF, ELSS, etc.
  • Section 80D: Deductions for medical insurance premiums.
  • Section 80E: Interest on education loans.

• Tax Filing: Individuals and businesses must file their income tax returns by specified due dates. Penalties may be imposed for late or non-filing.

3. Goods and Services Tax (GST)

• GST is an indirect tax levied on the supply of goods and services. It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
• GST Structure:
  • Central GST (CGST): Collected by the Central Government.
  • State GST (SGST): Collected by the respective State Governments.
  • Integrated GST (IGST): Collected on inter-state supplies.
• GST Rates: There are four main slabs: 5%, 12%, 18%, and 28%.
• GST Returns: Registered businesses must file regular GST returns (monthly/quarterly/annually) through the GST portal.

4. Tax Authorities and Administration

• Central Board of Direct Taxes (CBDT): Administers direct taxes like Income Tax, Corporate Tax, etc.
• Central Board of Indirect Taxes and Customs (CBIC): Administers GST, Customs Duty, and other indirect taxes.
• Income Tax Department: Responsible for the collection of income tax, enforcement, and tax assessments.

5. Advance Tax and Self-Assessment Tax

• Advance Tax: If the tax liability exceeds ₹10,000 in a financial year, individuals and businesses are required to pay advance tax in installments.
• Self-Assessment Tax: Paid before filing the income tax return to settle any remaining tax liability after accounting for TDS and advance tax.

6. Double Taxation Avoidance Agreements (DTAA)

• India has entered into Double Taxation Avoidance Agreements with many countries to avoid the double taxation of the same income.
• Relief under DTAA: Indian residents earning income from a DTAA country may claim relief by either the exemption method or the tax credit method.

7. Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)

• TDS: Certain payments such as salary, interest, commission, rent, etc., are subject to tax deduction at the time of payment. The deducted amount must be deposited with the government.
• TCS: Certain sellers are required to collect tax from the buyers at the point of sale, especially for specified goods such as alcohol, forest produce, etc.

8. Tax Appeals and Dispute Resolution

• Assessments: The Income Tax Department can scrutinize tax returns and issue assessments if there are discrepancies.
• Appeals: Taxpayers can appeal assessments to the Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal (ITAT), High Court, and Supreme Court.

9. Tax Penalties and Prosecutions

• Penalties can be imposed for various defaults such as late filing of returns, under-reporting of income, failure to pay taxes, etc.
• Severe tax evasion can lead to prosecution, which may result in fines and imprisonment.

10. Recent Developments in Indian Taxation

• Faceless Assessments: Introduced to enhance transparency and efficiency by eliminating face-to-face interactions between taxpayers and the tax authorities.
• Income Tax Reforms: India’s tax system is regularly updated to reduce litigation and increase ease of compliance. Key reforms have been in the areas of digital filing, taxpayer services, and rationalizing tax rates.