Get Your Solutions About Taxation Related Terms

Governments levy taxes on their citizens to generate revenue for projects to boost the economy and raise the standard of living of their citizens. The central and state governments levy taxes. Parliament or state legislatures must pass an accompanying law to levy taxes.

Multi-level benefits result from the payment of taxes, including the development of a nation, the improvement of infrastructure, the upliftment of society, and even welfare activities.

Tax Types                                                     

There are two main categories of taxes, which are further divided into subcategories: direct and indirect. In addition, a variety of minor cess taxes are also in place. These taxes are governed by different acts within the Income Tax Act.

1.      Direct Tax

Direct taxes are those paid directly by individuals or legal entities to the government. The Central Board of Direct Taxes (CBDT) does not consider indirect taxes. Therefore, individuals and legal entities cannot transfer direct taxes.

2.      Indirect Tax

Taxes levied on products and services are called indirect taxes. Service providers and product sellers collect indirect taxes. Taxes apply to both products and services.

This results in a higher price for the product or service. The government imposes only one indirect tax at present. A GST is another name for the Goods and Services Tax.

Advantages Of Paying Taxes

Paying your taxes on time has the following benefits:

·         Approvals of loans:

Generally, major banks require your income tax returns whenever you apply for a loan, such as a home loan, a vehicle loan, etc. It can be an ITR from the last two to three years. You can even reconsider your loan application if it was rejected at first with ITR if you have one.

Banks calculate your ability to repay a loan based on your income. Therefore, income returns provide a clear picture of the previous year's income and taxes paid.

·         Application For A Visa: 

You are often required to provide your previous year's income tax returns at the time of your visa interview by many foreign consulates. The most recent return will suffice for some, while others will require at least two years' worth.

Most countries in Europe, North America, and South East Asia are required to have this, but not so much in the Middle East and South East Asia.

This is because income tax returns prove that you are not trying to evade taxes by leaving the country. It would help if you always carried your ITR receipts when traveling abroad for pleasure or business. They will be helpful if you need assistance from a consulate in an emergency.

·         Individuals Working For Themselves: 

Entrepreneurs, freelancers, consultants, and firms' partners are not eligible to file Form 16. However, ITR receipts can be used as proof of income if their income exceeds the basic exemption limit. 

Documentation of taxes paid is also provided. In the course of business or financial transactions, this will be useful.

·         Tenders Issued By The Government: 

It depends on the individual government department with no specific rules, but sometimes it is required to submit ITR receipts to be considered for government contracts. Therefore, having sufficient income and being able to pay your obligations is important.

The following are other benefits:

·         Losses can be carried forward

·         Reclaiming tax refunds

·         A high-coverage life insurance policy

·         Indemnification

Tax Penalties For Non-Payment

The government can penalize individuals or legal entities who evade taxes in various ways. For example, taxes that have not been paid are subject to a penalty depending on their category. The fine and its interest should be paid as a penalty in addition to the tax owed.

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Frequently Asked Questions (FAQs)

1)     How much income tax should I pay?

The various income tax slabs are listed here. If you would like more information about your income tax liability, you can visit the website of the Income Tax Department, www.incometaxindia.gov.in.

2)     How should the ITR form or challan be filled out?

Challans must indicate the amount of tax, mode of payment, head of payment, assessment year, PAN, and payment type.

3)     How is taxable income different from exempt income?

A taxable income is subject to taxation. Exempt income, as defined by the Income Tax Department, is income that is not subject to taxation.

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