A fee or contribution charged by a government on a product, income, or activity is called Tax.
If tax is levied directly on personal or corporate income, then it is a direct tax.
If tax is levied on the price of a good or service, then it is called an indirect tax.
Why Tax is Charged?
The purpose of taxation is to finance government expenditure and various development expenditure of the country. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning.
TRICK TO REMEMBER TYPE OF TAXES
1) DIRECT TAXES——- “WePro.Co.In”
We:-wealth tax: Wealth tax is imposed on the wealth possessed by individuals in a country. The tax is on a person’s net worth which is assets minus liabilities.
In India, you need to pay it whether or not they yield any returns. Tax laws say that every individual and Hindu Undivided Family whose net wealth exceeds ₹30 lakh is required to pay wealth tax.
The tax, based on the value of the assets as on March 31, is charged at the rate of 1 per cent of the amount that exceeds the ₹30-lakh limit.
Some of India’s Double Taxation Avoidance Agreements (DTAAs) provide relief from double taxation for wealth tax as well. So, if you have paid wealth tax in any other country, you can expect some relief.
Pro:-property tax: Property tax or ‘house tax’ is a local tax levied on buildings, along with appurtenant land, and imposed on owners.
Co:-corporate tax: Corporation tax is a tax which is levied on the incomes of registered companies and corporations.
In:-income tax: Tax levied on the incomes of the individuals.
2) INDIRECT TAXES —– “ExCuSe ME”
Ex:-excise tax: It is an indirect tax levied on those goods which are manufactured in India and are meant for home consumption. It is Collected by State government.
Cu:-custom tax: It is a type of indirect tax levied on goods imported into India as well as on goods exported from India.
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Se:-service tax:Service Tax is a tax imposed by Government of India on services provided in India. The service provider collects the tax and pays the same to the government. Currently(as on 21/12/2014), it is 12.36%. It is payable on all services except the Negative List of Services.
M:-market tax/vat: The value added tax was introduced as an indirect tax into the Indian taxation system from 1 April 2005. The existing General Sales Tax Laws were replaced with the Value Added Tax Act (2005) and associated VAT Rules. Haryana became the first State in the country that had adopted the taxation on 1 April 2003. VAT is a sales tax collected by the government (of the state in which the final consumer is located) which is the government of destination state on consumer expenditure.
E:-entertainment tax: In India, entertainment tax is levied on every financial transaction that is related to entertainment such as film tickets, major commercial shows and big private festivals. Every state has different entertainment tax rates.