Top Banner
TAXATION TAXATION Aparna Aparna
23

TAXATION Aparna. CONTENTS Public Finance Public Revenue Taxation Objectives of taxation Canons of taxation Classification of taxation Individual.

Dec 15, 2015

Download

Documents

Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

TAXATIONTAXATION

AparnaAparna

Page 2: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

CONTENTS CONTENTS Public FinancePublic Finance Public RevenuePublic Revenue TaxationTaxation Objectives of taxationObjectives of taxation Canons of taxationCanons of taxation Classification of taxationClassification of taxation Individual Income tax rates in IndiaIndividual Income tax rates in India Exemptions and Deductions from taxExemptions and Deductions from tax ConclusionConclusion ReferencesReferences

Page 3: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

What is Public Finance? According to Dalton,’ Public finance is the branch of knowledge which is concerned with the income and expenditure of public authorities and with the adjustment of one to another.’ It deals with the study of revenue and expenditure of the government at the centre, state and local bodies. The public authorities have to perform various functions such as maintenance of law an order, provision of defence, production for bringing in economic development. The performance of these functions require large amount of funds which is raised through taxes, fees, fines, commercial revenues and loans.

Page 4: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Public Revenue

This is one of the branches of public finance. It deals with the various sources from which the state

might derive its income. These sources include incomes from taxes, commercial revenues in the form of prices of goods and services supplied by public enterprises, administrative revenues in the

form of fees, fines etc and gifts and grants.

Page 5: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Difference between Public revenue and Public receipts

Public revenue includes that income which is not subject to repayment by the government. Public

receipts include all the income of the government including public borrowing and issue of new

currency. In this way public revenue is a part of public receipts.

Public Receipts = Public revenue + Public borrowing + issue of new currency

Page 6: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Taxation

The most important source of revenue of the government is taxes. The act of levying taxes is called taxation. A tax is a compulsory charge or

payment imposed by government on individuals or corporations. The persons who are taxed have to pay the taxes irrespective of any corresponding

return from the goods or services by the government. The taxes may be imposed on the

income and wealth of persons or corporations and the rate of taxes may vary.

Page 7: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Objectives of TaxesObjectives of Taxes

Raising RevenueRaising Revenue Regulation of Consumption and ProductionRegulation of Consumption and Production Encouraging Domestic IndustriesEncouraging Domestic Industries Stimulating InvestmentStimulating Investment Reducing Income InequalitiesReducing Income Inequalities Promoting Economic GrowthPromoting Economic Growth Development of Backward RegionsDevelopment of Backward Regions Ensuring Price StabilityEnsuring Price Stability

Page 8: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Canons of Taxation

A good tax system should adhere to certain principles which become its characteristics. A good tax system is therefore based on some principles. Adam Smith has formulated four

important principles of taxation. A few more have been suggested by various other economists.

These principles which a good tax system should follow are called canons of taxation.

Page 9: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Adam Smith’s four canons of Adam Smith’s four canons of taxationtaxation

Canon of EqualityCanon of Equality Canon of CertaintyCanon of Certainty Canon of ConvenienceCanon of Convenience Canon of EconomyCanon of Economy

Page 10: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Canon of Equality This states that persons should be taxed according to their ability to pay taxes. That is why this principle is also known as the canon of ability. Equality does not mean equal amount of tax, but equality in tax burden. Canon of equality implies a progressive tax system.

Canon of Certainty According to this canon, the tax which each individual is required to pay should be certain and not arbitrary. The time of payment, the manner of payment and the amount to be paid should be clear to every tax payer. The application of this principle is beneficial both to the government as well as to the tax payer.

Page 11: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Canon of Convenience

According to this canon, the mode and timings of tax payment should be convenient to the tax payer. It means that the taxes should be imposed in such a manner and at the time which is most convenient for the tax payer. For example, government of India collects the income tax at the time when they receive their salaries. So this principle is also known as ‘the pay as you earn method’.

Canon of Economy

Every tax has a cost of collection. The canon of economy implies that the cost of tax collection should be minimum.

Page 12: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Classification of Taxes

Page 13: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Taxes can be classified into various types Taxes can be classified into various types on the basis of form,nature,aim and method on the basis of form,nature,aim and method of taxation. the most common and traditional of taxation. the most common and traditional classification is to classify into direct and classification is to classify into direct and indirect taxesindirect taxes..

Direct TaxDirect Tax Indirect taxIndirect tax

Page 14: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Direct taxesA direct tax is that tax whose burden is borne by the same person on whom it is levied. The ultimate burden of taxation falls on the person on whom the tax is levied. It is based on the income and property of a person. Thus income tax, corporation tax on company’s profits, property tax, capital gains tax, wealth tax etc are examples of direct taxes.

Indirect taxesAn indirect tax is that tax which is initially paid by one individual, but the burden of which is passed over to some other individual who ultimately bears it. It is levied on the expenditure of a person. Excise duty, sales tax, custom duties etc are examples of indirect taxes.

Page 15: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

On the basis of degree of progression of tax, On the basis of degree of progression of tax, it may be classified into:it may be classified into:

Proportional taxProportional tax Progressive taxProgressive tax Regressive taxRegressive tax Degressive taxDegressive tax

Page 16: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Proportional taxA tax is called proportional when the rate of taxation remains constant as the income of the tax payer increases. In this system all incomes are taxed at a single uniform rate, irrespective of whether tax payer’s income is high or low. The tax liability increases in absolute terms, but the proportion of income taxed remains the same.

Progressive taxWhen the rate of taxation increases as the tax payer’s income increases, it is called a progressive tax. In this system, the rate of tax goes on increasing with every increase in income.

Page 17: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Regressive taxationA regressive tax is one in which the rate of taxation decreases as the tax payer’s income increases. Lower income is taxed at a higher rate, whereas higher income is taxed at a lower rate. However absolute tax liability may increase.

Degressive taxationA tax is called degressive when the rate of progression in taxation does not increase in the same proportion as the increase in income. In this case, the rate of tax increases upto a certain limit, after that a uniform rate is charged. Thus degressive tax is a combination of progressive and proportional taxation. This type of taxation is often used in case of income tax. This is the case of income tax in India as well.

Page 18: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Taxable income slab (Rs.) Rate (%)

Up to 1,10,000Up to 1,45,000 (for women)Up to 1,95,000 (for resident individual of 65 years or above)

NIL

1,10,000 – 1,50,000 10

1,50,001 – 2,50,000 20

2,50,001 – 1,000,000 30

1,000,001 upwards 30

An education cess is added to the total tax payable at the rate of 3%An education cess is added to the total tax payable at the rate of 3% A 10% surcharge is applicable if the taxable income after taking all A 10% surcharge is applicable if the taxable income after taking all

the deductions is greater than Rs.10 lakh(1 million)the deductions is greater than Rs.10 lakh(1 million)

Page 19: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Income exempt from taxIncome exempt from tax

Dividends paid by companies and mutual Dividends paid by companies and mutual fundsfunds

Insurance proceeds from an Insurance Insurance proceeds from an Insurance companycompany

Maturity proceeds of a Public provident Maturity proceeds of a Public provident fund (PPF account)fund (PPF account)

Page 20: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Deductions from taxable incomeDeductions from taxable income

Section 88 of the Income Tax Act Section 88 of the Income Tax Act 1961(rebate on certain investments)1961(rebate on certain investments)

Section 80C deductionsSection 80C deductions Section 80D(Medical insurance premiums)Section 80D(Medical insurance premiums) Interest on Housing loansInterest on Housing loans

Page 21: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Conclusion

To conclude, we can say that the instrument of taxation is of great significance on

• increasing the level of economic activity - Regressive taxation• reducing income inequalities - progressive taxation• promoting economic growth – Funds could be reinvested

Social-Welfare Objective - Tax payment helps reduce the gap between the haves and have-nots. As it helps in mobilizing the surplus income from the haves and reinvesting them for public welfare, it helps these surplus funds to reach the have-nots.

Page 22: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

http://en.wikipedia.org/wiki/Income_tax_in_India

Frank ISC Economics- By D.K.Sethi and U.Andrews

References

http://finance.indiamart.com/taxation/income_tax/rates.htmlhttp://finance.indiamart.com/taxation/income_tax/rates.html

http://www.iloveindia.com/finance/post-office/public-provident-fund.html

Page 23: TAXATION Aparna. CONTENTS  Public Finance  Public Revenue  Taxation  Objectives of taxation  Canons of taxation  Classification of taxation  Individual.

Thank you