Basic Tax Obligations in India

Last Updated at: October 23, 2019
650
Basic Tax Obligation in India

All businesses in India are required to pay some taxes to the Central and State Governments. If you are planning to start a business, you must get to know about them from a reliable corporate tax attorney. Your lawyer will also handle the process of registration for payment of these taxes.

India, despite being one of the most populous countries of the world has only 5% of its population paying taxes. A tax is an obligatory contribution to the seamless administration of a society. In this post, we highlight the basic tax obligations under various statutes. Both Individuals and Companies are assessable under various tax laws discussed hereunder.

Below you’ll find some of the services provided at Vakilsearch that may answer your on the procedure, documents and process flow for a government or tax registration.

 

  1. The Income Tax Act, 1961

Being the charging statute of Income Tax in India, it levies, administers, collects and recovers Income Tax from assesses. An assessment which is an Individual or an entity that has earned income from multiple sources beyond a given limit is liable for paying an Income Tax. The income earned during the financial year (1st April to 31st March) is scrutinised in the subsequent assessment year by the Income Tax Department. There are severe penalties and interest for offences under this act.

  1. The Goods and Services Tax, 2017

Apart from the Direct Tax, the primary Indirect Tax levied in India is the GST. As the name suggests, the tax is payable on the supply of Goods, Services or Both; collected and paid to the government by the supplier by adjusting the input tax credit on his own purchases. The tax is paid on each value addition of goods or services until it reaches the final consumer, who ultimately bears the tax burden. Each outward tax payable is adjusted by the input tax paid by the supplier in the chain. This avoids the cascading effect of the tax.

Get Your Taxes Prepared

  • Customs Act, 1962

The Customs Act is responsible for the collection of Customs duties on import and export of goods & services to and from India. The Act levies various Safeguard Duties, Countervailing Duties to guard the domestic supplier’s market who may be unable to face competition from cheaper alternatives dumped by international imports. It also safeguards Indian Borders by avoiding smuggling of illegal or illicit exports and imports.

  • Road Tax

The Road tax is payable on the purchase of a vehicle, is the tax payable for driving the vehicle on the wonderful smooth Indian Roads. It may be termed as Vehicle Tax which is collected to reduce our carbon footprints and to curb the pollutants emitted by vehicles on the roads by planting trees and plants on the roadsides.

  • Toll Tax

The toll tax is generally an arrangement between the Government and the infrastructure company. The Company constructing and maintaining the highway or road is permitted by the Government to collect toll money for a specific period, for example, 20 years, to recover the cost of construction.

Contributing as a major source of revenue for the State Governments, the Professional Tax is levied on the employment of individuals being paid a salary exceeding Rs 15,000 per month. The tax is payable as a percentage on salary not exceeding Rs 2,500 per year.

  • The Dividend Distribution Tax

The DDT is levied by the Indian Government on companies who wish to distribute a dividend to their shareholders. This tax is levied at 15 % at the time of distribution and is exempted in the hands of the shareholders.

Payment of Income Tax, DDT, GST and some other taxes is essential for almost all businesses. As a business owner, you must get to know whether it is compulsory for you to pay these taxes. If you fail to pay them on time, you may face serious legal action from the respective Governments.

WHICH AUTHORITY WILL LEVY AND ADMINISTER GST?

The power for levying and administering CGST and IGST lies with the Centre and SGST, UTGST lies with the State and Union Territories respectively. Understand the procedure for GST registration and GST returns here.

How to participate in International Exhibitions through O/O DC (MSME) ?

As per policy package of MSMEs announced in 2000, the Small Industries Development Organization should possess a MDA (Market Development Assistance) for their promotion and development.More on Income Tax Return Filing.

What is Form 10E and who should file it?

The form 10E is filed by people who received their arrears of the past financial year in the current financial year. Learn more about ISO Certification.

How many ISO standards are there?

There are above than 21500 ISO standards present till date. But still, ISO 14001 and ISO 9001 are generic ISO standards.More info on NGO Registration in india.

How ngos can apply for grant?

An NGO is supposed to not pay any tax if it is approved under the 12A grant whereas 50 % of the payed tax will be refunded if eligible for 80G.More about Udyog Aadhar Registration.

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Basic Tax Obligations in India

650

All businesses in India are required to pay some taxes to the Central and State Governments. If you are planning to start a business, you must get to know about them from a reliable corporate tax attorney. Your lawyer will also handle the process of registration for payment of these taxes.

India, despite being one of the most populous countries of the world has only 5% of its population paying taxes. A tax is an obligatory contribution to the seamless administration of a society. In this post, we highlight the basic tax obligations under various statutes. Both Individuals and Companies are assessable under various tax laws discussed hereunder.

Below you’ll find some of the services provided at Vakilsearch that may answer your on the procedure, documents and process flow for a government or tax registration.

 

  1. The Income Tax Act, 1961

Being the charging statute of Income Tax in India, it levies, administers, collects and recovers Income Tax from assesses. An assessment which is an Individual or an entity that has earned income from multiple sources beyond a given limit is liable for paying an Income Tax. The income earned during the financial year (1st April to 31st March) is scrutinised in the subsequent assessment year by the Income Tax Department. There are severe penalties and interest for offences under this act.

  1. The Goods and Services Tax, 2017

Apart from the Direct Tax, the primary Indirect Tax levied in India is the GST. As the name suggests, the tax is payable on the supply of Goods, Services or Both; collected and paid to the government by the supplier by adjusting the input tax credit on his own purchases. The tax is paid on each value addition of goods or services until it reaches the final consumer, who ultimately bears the tax burden. Each outward tax payable is adjusted by the input tax paid by the supplier in the chain. This avoids the cascading effect of the tax.

Get Your Taxes Prepared

  • Customs Act, 1962

The Customs Act is responsible for the collection of Customs duties on import and export of goods & services to and from India. The Act levies various Safeguard Duties, Countervailing Duties to guard the domestic supplier’s market who may be unable to face competition from cheaper alternatives dumped by international imports. It also safeguards Indian Borders by avoiding smuggling of illegal or illicit exports and imports.

  • Road Tax

The Road tax is payable on the purchase of a vehicle, is the tax payable for driving the vehicle on the wonderful smooth Indian Roads. It may be termed as Vehicle Tax which is collected to reduce our carbon footprints and to curb the pollutants emitted by vehicles on the roads by planting trees and plants on the roadsides.

  • Toll Tax

The toll tax is generally an arrangement between the Government and the infrastructure company. The Company constructing and maintaining the highway or road is permitted by the Government to collect toll money for a specific period, for example, 20 years, to recover the cost of construction.

Contributing as a major source of revenue for the State Governments, the Professional Tax is levied on the employment of individuals being paid a salary exceeding Rs 15,000 per month. The tax is payable as a percentage on salary not exceeding Rs 2,500 per year.

  • The Dividend Distribution Tax

The DDT is levied by the Indian Government on companies who wish to distribute a dividend to their shareholders. This tax is levied at 15 % at the time of distribution and is exempted in the hands of the shareholders.

Payment of Income Tax, DDT, GST and some other taxes is essential for almost all businesses. As a business owner, you must get to know whether it is compulsory for you to pay these taxes. If you fail to pay them on time, you may face serious legal action from the respective Governments.

WHICH AUTHORITY WILL LEVY AND ADMINISTER GST?

The power for levying and administering CGST and IGST lies with the Centre and SGST, UTGST lies with the State and Union Territories respectively. Understand the procedure for GST registration and GST returns here.

How to participate in International Exhibitions through O/O DC (MSME) ?

As per policy package of MSMEs announced in 2000, the Small Industries Development Organization should possess a MDA (Market Development Assistance) for their promotion and development.More on Income Tax Return Filing.

What is Form 10E and who should file it?

The form 10E is filed by people who received their arrears of the past financial year in the current financial year. Learn more about ISO Certification.

How many ISO standards are there?

There are above than 21500 ISO standards present till date. But still, ISO 14001 and ISO 9001 are generic ISO standards.More info on NGO Registration in india.

How ngos can apply for grant?

An NGO is supposed to not pay any tax if it is approved under the 12A grant whereas 50 % of the payed tax will be refunded if eligible for 80G.More about Udyog Aadhar Registration.

0

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.