What Are Taxes?
A tax is a type of levy or finance charge that is imposed on the taxpayers by the government organizations to fund for public works such as public transports, roads, waterworks, the legal system, hospitals, military, educational institutes, research, and various other areas. There are other important things involved that everyone needs to take care of themselves like, Income tax return filing.
Income tax filing is extremely important for any individual. These taxes may be levied by the state, central, or local government bodies. There are two main types of taxes. One is a direct tax, and the other is an indirect tax. These taxes are further subdivided into various types.
What Are Direct Taxes?
A direct tax is the type of tax that is directly collected by the government or the imposing entity from a company, organization or employee. Taxes such as property tax, income tax, personal property tax, or taxes on assets are all a part of the direct tax. As mentioned, direct taxes are further divided into a few types, Corporate tax, income tax, and social security tax.
● Corporate Tax:
It is a tax paid by companies to the jurisdiction on the income or profit of the company or organization. It is taxed at a specific or particular rate like prescribed by the income tax act. The types of income of a company include profits earned by the business, capital gains, income from property, and other sources such as interest or dividend.
● Income Tax:
It is a tax imposed on businesses as well as individuals by the income generated by them. As per stated by law, taxpayers must file their income tax returns annually. Income tax is a source of revenue for the government which they use in the development of roads, city, public services, and provide goods for the people.
● Social Security Tax:
This tax is charged to both companies as well as individuals, and it is related to the income of the employee. The Social Security Rate helps the government pay for social problems such as health care, social welfare, and more.
What Are Indirect Taxes?
Supplier, retailer, or producer collected an indirect tax and paid to the government. However, it is passed on to the consumer as a part of the price of purchase of good or services. To simply put, the consumer is paying for the product indirectly. The body which collects the tax then pays to the government. There are several types of indirect taxes.
● Import Duties or Tariffs:
These are the taxes that are to be paid on certain imported products or when bringing goods from other countries into the country. They are also commonly known as customs taxes. These are the taxes that are paid at the port of entry, be it airports, shipping ports, etc. In most cases, the courier companies pay these taxes on your behalf and later release the goods only when you pay all the taxes.
● Excise Duty Tax:
This is a tax that is not directly paid by the consumer. On the contrary, it is passed on to the consumer by a producer or merchant.
A VAT is short for Value Added Tax and plays a vital role in the GDP of the country.
Good and Service Tax, also known as GST, is the tax charged on goods and services.
● Stamp Duty Tax:
It is a tax that is generally levied on document and transactions like buying and selling of land.
Short for Communication Services Tax, CST is imposed on sales of communication services like TV, satellite, cables, mobile communications, video, and music streaming VOIP, and others.