CLASSIFICATION OF TAXES:

Direct and indirect taxes are different in a way these are implemented. You may have to directly
pay some taxes such as corporate tax, income tax etc., while some are indirectly paid such as
service tax, sales tax, value added tax etc. There are few other taxes that the Central
Government has brought into effect and levied on both indirect and direct taxes such as Krishi
Kalyan Cess tax, Swachh Bharat Cess tax, infrastructure cess tax etc.

I. Direct Tax

The Central Board of Direct Taxes is one of the bodies that takes care of direct taxes and helps
on with its support, duties, governing etc. Some of these are mentioned below:

1. Income Tax Act

Following the IT Act of 1961, the government rules the income tax in India. It comes from the
sources such as owning of property or house, business, salaries, gains from investment etc.

2. Expenditure Tax Act

The expenditure tax was introduced in 1987 and concerns the expenses you incur when availing
services at a restaurant or hotel. It does not apply on Jammu and Kashmir but rest of the India.

3. Securities Transaction Tax

When you trade in stock market or securities, you gain some substantial amount of money
which becomes a source of income, and is levied with securities transaction tax. The same is
added to the share price, so when you sell or buy shares, you pay this tax every time.

4. Capital Gains Tax

The capitals gains tax is implied on sizeable earning from sale of property or investments.
There are two types: short term capital gains and long term capital gains. The interest earned
on investment is taxed.

5. Interest Tax Act

This tax came into effect in 1974. It states the amount payable on interest earned from specific
situations. There was an amendment, which eliminated requirement of interest tax on interests
earned later to March 2000.

6. Perquisite Tax
The privileges that employers bestow on employees are taxed as well. These come under the
perquisite tax. The perks can extend to compensations such as housing, cars, phone and fuel
bills etc. If these facilities are used for official purpose, then the costs incurred may be
exempted from such taxes.

7. Corporate Tax

This tax is paid by firms for the revenue these earn. There are specific tax slabs in this section
and the payment of tax is according to these slabs. Types are: minimum alternative tax, fringe
benefit tax, and dividend distribution tax.

8. Wealth Tax Act

As per the budget 2015, the Wealth Tax stands abolished, but it was enacted in 1951. It was
meant to pose taxation as per the net wealth of the company, individual or a Hindu Unified
Family.

9. Gift Tax Act

Since 1958, the Gift Tax came into being, which taxed people on receiving gifts worth a value
and shelling an amount up to 30% of the gift's expense. However, this tax was done away with
in 1998. Now if someone other than the exempted entities gives gift to you, exceeding INR
50,000 then this gift amount will be taxed.

II. Indirect Tax

Some of the taxes are levied on the facilities and services you enjoy and these come to be taxed
by the government. Here are few of the important indirect taxes.

1. Value Added Tax

VAT is a commercial tax but not levied on commodities with zero rates such as essential drugs
and food items or those that come under exports. However, value added tax comes in play for
supply chain where it is paid by dealers, distributors and manufacturers.

2. Sales Tax

This tax was levied on sale of product and came under both central and state legislation. The
limitation of the sale tax is that it can be taken once for particular product. Thus if the product
is resold, this tax won't apply.

3. Service Tax
The service tax as the name implies is a tax added on services provided in India. The last ratio
percentage for it was 14 and it is not applied on goods but firms that offer services. Such amount
is reflected in the bill to customers

4. Goods and Services Tax (GST)

The most talked about tax is the Good and Services Tax, which has superimposed several of
the indirect taxes, which now stands defunct. GST is consumption based tax and applies on
value added services, goods at several stages of consumption in supply chain. Merchants can
pay the GST rate applicable and claim it through the tax credit system.

5. Excise Duty

This tax is imposed on things manufactured in India and called as Central Value Added Tax or
CENVAT. It is collected from the manufacturer of goods by the government. No excisable
goods that bear any payable duty are allowed to move without the payment of duty to the
destination where these are manufactured or produced.

6. Custom Duty and Octroi

On making a purchase that has to be imported in India from another country, you may have to
pay custom duty and Octroi tax. The Octroi is for ensuring that goods from across the borders
and coming into the country are taxed properly.

III. Other Taxes

The other taxes are referred to as cess and are levied by the government with intention of
generating funds for specific purposes as decided by the Finance Minister.

1. Swachh Bharat Cess

Starting from November 2015, the Swachh Bharat Cess is applicable on taxable services of
India and is accounted at 0.5% over and above service tax of 14%. This cess is not implemented
on services which are completely exempt from service tax or services covered under negative
services list. This is collected by the Consolidate Fund of India and utilize in promoting and
funding government campaigns related to Swachh Bharat efforts.

2. Krishi Kalyan Cess

Applicable since June 2016, the Krishi Kalyan Cess is levied on all services of India in order
to extend welfare to farmers and improve the agricultural facilities of the nation. The rate for
this tax is 0.5% and charged over and above the Swachh Bharat Cess and service tax.

3. Professional Tax
Employment or professional tax is a tax levied by the state governments. As per the norms,
individuals practising a profession such as lawyer, doctor, company secretary, chartered
accounted or earning etc must pay this tax. Not every state levy professional tax, whose rate
also differs as per the state government's discretion.

4. Property Tax

Real estate tax or property tax is levied by the local municipal bodies of all cities. These are
levied to make funds for maintaining basic civic services. The owners of commercial and
residential properties are subject to the Municipal tax.

5. Entertainment Tax

The entertainment tax is levied by the government on television series, amusement, feature
films and recreational parlours. Such tax is taken into account as the business entity's total
collection of earnings from film festival earnings, commercial shows and audience
participation.

6. Stamp Duty, Registration Fee, Transfer Tax

The mentioned taxes supplement property tax and are incurred at specific such as charges of
stamp duty, property registration or transfer of ownership to another person or entity.

7. Infrastructure Cess

The infrastructure cess came into effect on 1st June 2016. A cess of 1% is eligible on motor
vehicles driven on LPG/CNG/Petrol. The vehicles accounted for such cess must be 4 meters or
less in length and 1200cc or lower engine capacity. 2.5% tax has to be paid for diesel motor
vehicles that do not exceed the mentioned length and contain engines with capacities lower
than 1500cc. 4% cess is applicable on vehicle's overall cost for big SUVs and sedans.

8. Education Cess/Surcharge

The Education Cess helps to cover the cost by government for sponsoring educational
programs. The tax is collected independently and applicable on all Indian corporations, citizens
and other people residing in the country. Currently, the cess amount is 2% of individual's
income.

9. Entry Tax

Under entry tax, select states in India such as Madhya Pradesh, Assam, Gujarat, Uttarakhand,
and Delhi account for tax payable on items that enter this state via e-commerce establishments.
 10. Road Tax and Toll Tax

This form of tax is paid for the infrastructure developed by the government for roads and
bridges. The amount of such tax is rather negligible and utilized for maintenance of particular
roadway projects.