Tax Meaning and Types

Tax Meaning,Types, Income Tax and Tax Rates for 2016-17 (AY 2017-18)
Tax Meaning

Tax Meaning,Types, Income Tax and Tax Rates for 2016-17 (AY 2017-18)

What is Tax?:

 Tax Meaning: Tax may be defined as a compulsory extraction made by Government from the hard earned income of the general public for their public purpose. It is a financial charge or other levy imposed on individual or a legal entity by government. Taxes form a pool of resources to be used for the collective benefit of the public. However taxes lack direct quid-pro-quo between the tax payer and the government. It means that tax payer cannot claim direct and equal reciprocal benefits as a consideration of taxes paid.
Types of Taxes:—
There are basically two types of taxes:
1. Direct Taxes: Direct taxes are collected directly from the tax payers and they have to be paid by the persons on whom it is imposed. These are levied on one person and collected from same person. The levying of tax means impact of tax and collection of tax means incidence of tax. If both impact and incidence of tax are on same person, such tax is called direct tax. Income tax, corporate tax and wealth tax are the example of direct taxes.
2. Indirect Taxes
Indirect taxes are those, which are levied on one person and collected from another person. If both impact and incidence of tax are on two different persons, such tax is called indirect tax. Sales tax, VAT, Custom duty, excise duty are examples of indirect taxes.

Income Tax:
Income tax is the tax imposed on the total income earned by an assesses during the previous year at current rates of tax.
Rates of income tax for the Financial Year 2016-17 (Assessment year 2017-18)
For individual (less than 60 years), HUF, AOP or BOI, Artificial Juridical Person
Income                 Rate of Tax
Up to 250000             Nil
On next 250000         10%
On next 500000         20%
On balance                 30%
For individual who is of the age of 60 years or more but less than the age of 80 years at any time during the previous year
Income                Rate of Tax
Up to 300000           Nil
On next 250000       10%
On next 500000       20%
On balance                30%
For individual who is of the age of 80 years or more at any time during the previous year
Income                             Rate of Tax
Up to 500000                    Nil
On next 500000               20%
On balance                       30%
Surcharge: The rate of surcharge shall be 15% of income tax if total income exceeds one crore.
Education Cess: 2% of tax and surcharge.
Secondary and Higher Education Cess: 1% of tax and surcharge.

Must See: How to calculate Tax of a Person for a Financial Year

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